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Page last updated
February 15, 2003

ISSN No:1470-5494 All rights reserved. No part or portion of this publication may be reproduced or transmitted in any form without the express, prior and written permission of the publisher. Whilst every effort has been made to ensure accuracy, the publisher accepts no responsibility for any person acting as a result of the content herein.



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.

Euronext Brussels
Euronext Brussels is a key-player for re-designing the new market infrastructure. Over the last few years the Brussels markets have been preparing for an international environment.

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
Euronext is aiming to offer three markets an integrated solution from trade to settlement through the creation of single platforms for trading, clearing and settlement. This ambitious project will be rolled out in Paris, Brussels and Amsterdam in several phases at different levels.

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.

OTC Settlement
Today, there is a very active Over The Counter market in Belgium. Over the past years Euronext Brussels' CIK has pioneered the expansion of an efficient OTC equity clearing system i.e. the Electronic Matching and Securities Settlement System (EMSS) which is since 1999 a fully-fledged real time gross settlement system.

This system will remain operational in the Euronext context pending new developments within the Euroclear system.

Bond Clearing and Settlement
In 1999 and 2000 trading of government bonds was extended to EuroMTS, MTS Belgium and Repoclear thus adding to the liquidity of the market.

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 Income Payment
The Belgian market is essentially a bearer market ; therefore ex-date and record date are mostly the same. Moreover, this date mostly corresponds with the payable date for income on shares and bonds. Dividends are paid usually once a year. Most companies pay dividends between April and July. The dividends are announced net of corporate tax and withholding tax.

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 issues
At present two taxation rates are applicable on Belgian income : 25% for ordinary shares and bonds issued before 1 March 1990 ; 15 % for VVPR shares and Bonds issued after 1 March 1990.

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.

Proxy Voting
It is not common practice for private investors to vote at general meetings in Belgium. This has something to do with the fact that in most cases the shareholder himself or a representative has to attend the meeting. To vote by letter is only in rare circumstances provided for in company by-laws.

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.

The future
The recent market developments are giving market players the opportunity to broaden the scope of their services.

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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