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Q-and-A: Clearstream CEO Jeffrey Tessler

3 min read

Modern Money

The proposed merger of NYSE Euronext and Deutsche Boerse could have a profound impact on Clearstream. Clearstream is part of Deutsche Boerse Group and is one of Europe’s leading providers of post-trade services. SmartBrief caught up with Clearstream CEO Jeffrey Tessler on the sidelines of Sibos 2011 and asked him about the merger and other issues affecting markets.

Positives aspects of the proposed merger

“The market is continuing to search for ways to take the risk out of the transaction. If we were having this conversation in 2008, we would have thought trust would be back by 2011. It’s not. The market needs more of these solutions that can only come from integrated organizations.”

“The merger puts us in a better position in the U.S. market. Feedback from market participants is that the merger will be very strong. If people think you are the winner and you act like the winner, then you are the winner. … We’ve been given the pole position. This race is gonna begin. I hope when this race is over we get the checkered flag, and I think we will.”

Hurdles or potential pitfalls that might affect the deal

“With this transaction in particular: nothing. In the market as a whole, we have to recognize we are in uncharted territory. Given that we are an institution located in Europe, it would be naive to say the situation in Europe is not difficult. It is very difficult. We started with a banking crisis that morphed into a sovereign crisis, which is now morphing back into a banking crisis. The issues are serious. … We are operating in a market environment that is not business as usual. The U.S. has its fiscal issues, but in terms of a market, I don’t think the situation is as troublesome as it is in Europe. The [European Central Bank] is basically acting as the money market for the European banking system because that trust amongst banks that faltered in 2008 really hasn’t come back. We’re operating on a foundation that is a bit shaky, but the positive of it for us is that foundation needs solutions that we are really focused on.”

Key market trends

“In our business, collateral management is going to be the deciding factor. In the past, the reason why a client would choose to use you or not was based on settlement and liquidity. … Going forward, it is really going to be around collateral efficiency.”

Concerns about the prospect of a Greek default

“We are very, very comfortable, and I think the market is very comfortable. There are going to be issues with who winds up holding what exposure. We have nothing, but in terms of the banking system, that is the biggest issue.”

Dodd-Frank Act’s call for the establishment of trade repositories

“Brazil has had it for 15 years because the government down there was very smart. When the market said to the government, ‘We want to develop this [over-the-counter] derivatives market,’ the government said, ‘Fine, but everything has to be registered.’ In the U.S. and Europe, we let the markets develop first, and now after the crisis, we are saying, ‘Hey, wait a minute. Everything has to be registered.’ “