Euroclear is a global clearing and settlement chamber, that is, a fully electronic payment and delivery system for securities, which allows the exchange of securities and money from one side of the planet to the other in real time.
Furthermore, Euroclear is a company that offers financial services. It has a complex structure in which there is also a bank, Euroclear Bank.
Origin of the Euroclear
Euroclear was created in 1968 by a Belgian office of the JP Morgan bank with the aim of improving the functioning of the Eurobond market, which, at that time, suffered from administrative problems derived from cross-border investment. However, most of the capital is held by its clients.
Its headquarters are in Brussels, but it also serves national clients in local transactions in other European places. For example, it participates in operations in the United Kingdom, France, Ireland, Finland, Sweden and the Netherlands. The chambers of these countries act as arms of Euroclear to service these local operations.
Euroclear fulfills three main functions:
- Clearinghouse: This means that it allows the parties that trade securities to have no mutual obligations. One for payment of the titles and the other for delivery. Rather, they maintain said obligations in front of the clearing house. In this way, Euroclear is the buying party for the person or company that sells, and vice versa. Euroclear therefore eliminates counterparty risk and ensures the anonymity of the parties in the negotiation process. The operations carried out through this chamber amount to a total of 897 trillion euros per year.
- Custodian of company securities: Custody or keeps financial assets such as company stocks or bonds. In this case, Euroclear is an international securities depository, which means that it has clients from all over the world.
- Record changes in title ownership: This means that you must keep a record of the title change of hands. In addition to delivering the assets to the buying party and the money to the selling party.