Euronext NV, the owner of the Republic's stock exchange, favours moving the settlement of Irish shares to Brussels after Brexit, according to briefings to industry.
The Republic – the only European Union member without its own central securities depository – has relied on a UK-based firm called Crest to settle trades since the 1990s and the dawn of electronic financial markets.
Once the UK leaves Europe’s single market, and after the accompanying loss of financial passporting rights, Crest probably won’t be able to continue providing that service, Euroclear, the giant CSD that runs Crest, has said.
While Irish securities and exchange-traded funds are settled in Crest, Irish government bonds are settled at Euroclear Bank in Brussels.
Euroclear Bank plans to base the future stock-settlement arrangements on that existing operation, according to briefings to industry representatives in Dublin and the UK last month.
Euronext has already indicated that the Belgian model has shown it can work in an Irish context.
The plan would be ready by the time the Brexit transition period finishes at the end of 2020, according to the briefings.
In the meantime, Euroclear wants the current system to remain after March 2019 – when the UK is due to leave the bloc – via so-called grandfathering. That generally means exempting existing products or contracts from new laws.
Euronext needs its Irish regulator, the Central Bank, and the European Securities and Markets Authority to approve any plan for how Irish stocks will be settled.
The new arrangements wouldn’t involve any new jobs or an office in the Republic, according to the briefings. Market players could, however, face extra costs as establishing the new system would require co-investment from industry.
Euroclear could face competition in settling Irish stocks. Deutsche Boerse AG's securities settlement arm, Clearstream, is also exploring setting up a CSD in Ireland, The Irish Times has reported.
The Central Bank declined to comment, as did spokesmen for ESMA and Euroclear.
Euronext “is engaging with the Irish authorities, market participants and other relevant stakeholders to ensure a viable long-term CSD solution for securities,” a spokeswoman for the company said. – Bloomberg
