Travers Smith advises on post-Brexit transition of the UK's euro securities markets


On Monday 29 March, Travers Smith's long-standing client, Euroclear UK & Ireland Limited (EUI) – the UK's central securities depository and operator of the CREST securities settlement system - successfully launched a new post-Brexit market solution for euro settlement. 

The cross-disciplinary Travers Smith team devised, developed and negotiated an entirely new and bespoke legal model for the solution from the ground up, advising on the wide-range of novel and complex trust, contractual, banking/insolvency and finality issues (as well as the regulatory considerations) underpinning it.

This hugely innovative and systemically important project had to be delivered to an unprecedentedly tight timeframe, due to EUI's existing access to TARGET2 via the European Central Bank terminating at the end of Q1 2021.  

The Travers Smith team was led by Senior Counsel Natalie Lewis and Partner Phil Bartram, with support from Associates Matt Humphreys and Felix Bayne, as well as Senior Consultant Mark Evans.

Natalie Lewis commented "We are delighted that EUI turned to us to assist its successful delivery of this ground-breaking and cutting-edge project. It is a project of considerable systemic significance to our financial markets and their global standing after the UK's withdrawal from the European Union. We are immensely proud that we have been able to help such an important client to achieve this excellent result allowing for the continuation of euro settlement in the UK securities markets to the highest international standards for safety and efficiency, and to have done so under such intense market scrutiny and within such time-critical parameters."

 The team's analysis, solutions and work product involved:

  • the putting in place and negotiation in very short order of a robust "springing trust" and contractual framework with the CREST settlement bank community and other CREST participants to support the continuance of delivery-versus-payment settlement against euros
  • rule-based solutions to ensure finality of settlement and the safe migration of euro settlement to the new model
  • arrangements to facilitate compliance with new post-Brexit laws and regulations requiring EUI's systems to provide central bank money settlement for euros notwithstanding the withdrawal of EUI's access to the TARGET2 system.

Michael Carty, CEO, Euroclear UK & Ireland said: “We are extremely pleased to have successfully launched our new Euro settlement model which will allow us to continue to provide central bank money settlement in Euros, alongside our other two central bank money currencies of Pound Sterling and US Dollars. Multi-currency settlement is a crucial component of our strategy, providing full DvP settlement in all three currencies and allowing Issuers to pay their dividends to their investors in the most optimal currency.”

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