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Settlement organisations partner to automate messaging for Euro medium-term note market

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The Depository Trust & Clearing Corporation, Clearstream Banking and Euroclear Bank are expanding the scope of the European Pre-Issuance Messaging system to support the growing euro

The Depository Trust & Clearing Corporation, Clearstream Banking and Euroclear Bank are expanding the scope of the European Pre-Issuance Messaging system to support the growing euro medium-term note market.

The EPIM system will now automate the pre-issuance communication and International Security Identification Number allocation process for euro MTNs, a market that has grown 22 per cent over the past two years, from EUR5.0trn outstanding in early 2007 to EUR6.1trn today.

Euro medium-term notes notes, usually with at least a one-year maturity, issued directly to the market and offered continuously rather than all at once, like a bond issue.

EPIM is being used in a similar capacity within the European commercial paper and euro certificates of deposit markets. Since its launch in May 2002, it has served as a central messaging hub directly linking dealers, issuing and paying agents, securities depositories and numbering agencies, allowing them to exchange standardised and secured issuance information in real time.

By automating pre-issuance information processing and ISIN allocation for new commercial paper and certificates of deposit issues as well as now euro MTNs, EPIM is enabling the processing of these transactions for same-day settlement.

The EPIM system was developed in close collaboration with various dealers, issuing/paying agents and trade associations with in-depth knowledge of the market’s needs, and is based on the architecture of the pre-issuance messaging service developed and launched in the US by DTCC in 1999., DTCC operates and manages the actual messaging hub on behalf of Clearstream Banking and Euroclear Bank.

According to the three partners, EPIM significantly reduces manual processing costs for the industry, eliminating the labour-intensive and error-prone phone, fax and email-based communications generated during the ISIN request and allocation processes.

Through a streamlined, industry-standard messaging and automated workflow, EPIM increases accuracy and reduces processing errors, discrepancies and delays, while preserving the flexibility that characterises the short-term debt money markets.

‘Bringing automation to the ECP marketplace with EPIM has helped drive down costs for new issuances and enhance efficiencies for market participants,’ says Susan Cosgrove, a managing director with the DTCC Clearance and Settlement Group.

‘By leveraging the EPIM system to bring automation to the MTN market, we are taking another important step in evolving the infrastructure to meet the needs of financial firms and investors. EPIM will eliminate the time consuming and outdated manual processes of the MTN market and help play a role in spurring long-term growth.’

Olivier Grimonpont, director of fixed-income product management at Euroclear, says: ‘Taking a proven system like EPIM and leveraging its capabilities and benefits to other asset classes is an excellent way of adding value for clients. As an automated solution that reduces costs and increases efficiency, we believe EPIM will be a welcome improvement to the MTN market, particularly during these times of financial pressure.’

Mark Kieffer, head of issuance and distribution services at Clearstream Banking, notes that EPIM was critical to support the growth in the European commercial paper market since May 2002.

‘Now we have the opportunity to bring a similar and much-needed degree of operational efficiency to the MTN market, which we believe is essential to foster greater growth in the years ahead,’ he says.

‘As an increasing number of investors turn to the MTN market, we are now fully prepared to manage pre-issuance communication and issue new ISINs quickly in an automated environment.’

Peter Eisenhardt, chairman of the International Capital Market Association’s European commercial paper committee, adds: ‘EPIM has brought us closer to achieving full straight-through processing in the European commercial paper marketplace. Speed is absolutely critical, especially when there’s volatility in the money markets. With EPIM, ISINs are assigned in less than five minutes.’

Chairman Graham Cox says members of the International Capital Market Services Association are delighted to see the extension of EPIM coverage to MTNs. ‘EPIM has proven a great response to the market’s need for a secure, efficient and reliable pre-issuance communication tool,’ he says. ‘Given its capabilities in terms of volume and speed, and contribution towards STP, we encourage the issuing community to adopt the expanded functionality EPIM offers.’

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