The proposed merger between Deutsche Borse
and the London Stock Exchange (LSE) will create "the leading
local market infrastructure group in Europe," according to
Jeffrey Tessler, member of the executive board at Deutsche
Speaking at Clearstream’s
Global Funding and Financing Summit, held in Luxembourg this
week, Tessler described the merger as "the only way we are
going to be able to tackle the competition coming out of North
America and Asia".
"It is the point in time that the Deutsche
Borse business model is put to the test of coping with
increased market turbulence."
The €24bn merger of the two exchanges
will be a "vital post-Brexit lifeline between these two cities"
and a "liquidity branch between Frankfurt and the global
financial centre of London," said Tessler.
"The bridge will help channel some of the
enormous pool of globally mobile investment capital which,
let’s face it, will continue to gravitate towards
The merger will be further driven by
Clearstream’s TARGET2-Securities (T2S), placing
"Deutsche Borse at the centre of the European capital markets,"
according to Wille. The main scenario foresees the migration of
Clearstream’s CSDs in Germany and Luxembourg in
wave 4 to take place on 6 February.
"We are now at an important milestone of
that project, as Clearstream is set to become the CSD entry
point for the eurozone."
T2S will provide new added value, setting
a new standard for the industry. "After nine year of dealing
with this, I will be very glad when it’s up and
running," Wille told delegates.
Gareth Allen, co-head of repo trading at
UBS, similarly acknowledged that there is a perception of T2S
as a "huge change in the operational line." Allen said that UBS
is taking a cautious approach before going live.
Deutsche Borse announced in November that
Clearstream had teamed up with Citi and UBS for an innovative
T2S solution, providing market participants with a single point
of access to T2S, along with a single integrated collateral
pool and post-trade services.
Wille said: "Potentially we created a
structure where UBS Group has the ability to put all their
European assets into one place [Deutsche Borse], but critically
we have the structure in terms of the pooling of
Allen stated that the initiative addresses
the common issues managing inventory. "We want to keep
securities as static as possible and also pool securities as
much as possible for obvious benefits. So the idea of coming
together with Citi to create a virtual pool gives the best of