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Belgium at the heart of EURONEXT
Today all market players are preparing for the new trading, clearing and settlement environment of the Euronext market which will become operational this year.
Over the last few years Belgian investors have been increasing looking to invest abroad, Paris and Amsterdam being two important focuses of attention.
Brussels unfortunately has not enjoyed this kind of attention from foreign investors. This evolution on the financial markets has brought with it that Belgium, although the smallest of the three Euronext markets, has been able to create a competitive edge in the field of global custody, clearing and cross-border settlement. Bank Brussels Lambert is today one of the leading custodians in Brussels having thus acquired a large expertise as a local provider of custody, clearing and settlement services for the Belgian, French and Dutch markets.
Today, Euronext Brussels has a high international profile having attracted remote members of various nationalities, Benelux cross members and foreign intermediaries who have access to the markets via remote screens. Its international vocation will definitely gain momentum when Euronext will become fully operational.
Last year, in order to facilitate the Euronext merger, the back office processing and the cross border settlement and with a view towards harmonisation of the European stock exchanges to a T+3 rolling settlement, Euronext Brussels abolished its forward market. The changeover to T+3 rolling settlement was implemented in stages over a period from September to November 2000.
As a consequence of the withdrawal of the forward market, the stock exchange anticipated a higher fail rate and therefore committed itself to develop a centralised lending and borrowing facility for direct market operations. This system went live on 1 December 2000.
The Euronext Project
From a strategic point of view Euronext wants to avoid possible undue competition between members in the different markets because of the phased implementation across the different country members. Therefore Euronext decided that the market segments will be made accessible to every market member only upon completion of the migration onto the new clearing platform by the three markets. In the meantime clearing and settlement will continue to be processed via the local systems and depositories. So this means that, for example, a trading member on the Belgian market today who acts as a trader on the French segment on the same trading platform, operational from May 2001, has two options. He can either use his own capacity to handle the clearing and settlement via the French local systems, or look for a clearing agent in the French market who will clear and settle the trades he has executed on the French segment.
The planning for the complete roll-out of the new market infrastructure in the three markets is quite aggressive and has already required some adjusting. Phase 0 of the project started with the creation of Euronext in September 2000 i.e. the merger of BXS-AEX-Parisbourse into one exchange, one company under Dutch law.
The next important step from a legal point of view was the creation of Clearnet which was slightly delayed. Clearnet is an authorised bank under French law and legally integrates the former local clearing houses. Through the grandfather clause all existing members of the three clearing houses became members of Clearnet.
The roll-out of the new trading platform NSC started in France in April 2001 and Belgium followed in May. The Netherlands are scheduled to migrate in September. The local clearing systems will gradually be abandoned and replaced by the Clearnet tool, 'Clearing 21'. France already migrated onto the new system. Belgium is scheduled to join in September 2001. The Netherlands will have migrated into the Clearing 21 environment by the end of the first quarter of year 2002.
When the roll-out will be complete, settlement of deals executed on Euronext will be possible either via the local depositories against central bank money or in Euroclear in commercial bank money. By the end of the first quarter 2002 Belgian members of Clearnet will thus be able to settle all stocks listed on Euronext via the domestic central depository. Going forward Euroclear will make the necessary investments for the optimisation of the settlement through the creation of one single platform at Euroclear.
This system will remain operational in the Euronext context pending new developments within the Euroclear system.
Bond Clearing and Settlement
The National Bank of Belgium (NBB) acts as clearing house for government debt and commercial paper , irrespective of the platform these instruments are traded on. The NBB Clearing settles operations on a trade by trade basis in multi-batch processing throughout the day.
Custody Core Services
Corporate Actions and
The most frequent corporate actions in the Belgian market are : capital increase by rights issue or bonus issue, takeover bids, exchange offers, exercise of warrants, bond conversions, redemptions, optional stock dividends, exchanges, stamping of securities. As from the official announcement of the corporate action the custodian bank will provide its client with full details on the action, entitlements and deadlines. Rights claims are handled by the custodian bank, who will also follow up on clients' responses to ensure they are made within the market deadlines.
Taxation and reclaim
Traditionally, BBL has been offering flexible custody account facilities enabling its clients to efficiently manage income payment with regard to Belgian fiscal imperatives. The assets of all total tax exempt clients can be lodged in one "Clients Tax Exempt Account" (CTEA), thus allowing gross payment of Belgian dividends on payment date.
For taxable investors who can benefit from a partial refund of withholding tax, under the double taxation agreement between Belgium and the country of the beneficiary, BBL provides a full tax reclaim service which allows efficient processing of the reclaims. Moreover, clients will receive detailed reports on outstanding claims and scheduled refund dates on a monthly basis.
Today a refund linked to a partial reclaim takes about ten months on average in Belgium ! However, BBL offers a Quick Refund service for Belgian dividend payments which provides for refund within a few weeks after payment date.
Holders of registered shares must be convened by mail. For holders of bearer and dematerialised shares, the meeting must be announced in the press. The relevant notices, with full agenda/proposals are also to be published in the Belgian Official Gazette. Voting by proxy is subject to the conditions determined in the company's by-laws. Proxy material is usually only available in French and/or Dutch and in most cases special company forms are to be used. Bank Brussels Lambert provides translations in English. Although financial institutions cannot act as proxy themselves, they may indicate an appropriately qualified person as representative to attend the meeting on behalf of the shareholder. All shares voted are blocked , by law, six to three days before the meeting.
Bank Brussels Lambert is member of the ING Group and provides trading, clearing and custody services for a wide range of domestic and international investors.
Today BBL is offering its clients a unique point of entry for the clearing of their Belgian stocks irrespective of the market they are traded on. This way clients can access different trading platforms without having to invest in clearing developments. In addition, we provide a day to day coaching of our clients for STP, thus reducing their processing costs.
Looking ahead, as BBL/ING Group today has operational centres in the three Euronext markets, we have the flexibility to anticipate the legal and operational implications of the Euronext environment and further extend the scope of our services for trading, clearing, settlement and custody.Nadine Bauters
Securities Product Management
Bank Brussels Lambert
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