The History of Euroclear and Settlement Issues

Sunday, April 06, 2008

In the continuing drive to stay ahead of the markets and technology, it’s hard to remember what the front office of financial services looked like 20 years ago, never mind the back office infrastructure.

In Plumbers and Visionaries, Peter Norman writes the history of securities settlement and Europe’s financial markets, a project sponsored by Euroclear.

Reading the story today, one does have occasional feelings of déja vu all over again. In 1985, the BIS was concerned about some new instruments and off-balance sheet activity. Norman also notes that the 1987 crash focused attention on counterparty clearing houses. Whew – good thing that all got settled, then. The crash did spur the G30 to focus on back office settlement risk, moving the issue to the boardroom level, as the Bank of England said.

He describes the way American banks flourished when Paul Volcker led the Fed and pulls together reports from the BIS and the American General Accounting Office and other official and unofficial groups that focused their attention on settlement issues. And the book comes pretty close to the present with a discussion of Turqouise.

If you’re involved in capital markets, you probably need a copy or two of this around – it certainly would be useful for smart new hires who would like a broad historical view of what happens after a trade is done. It is extremely well organized with a chronology at the end, followed by brief biographies of major players and a glossary of technical terms.

Norman, a writer for the FT, has taken on a complex subject and made its history very readable through good clear writing.

Posted by Tom Groenfeldt on 04/06 at 01:52 PM