paperJam speaks with CEO Jeffrey Tessler.

All indicators coming out of Clearstream seem to be positive. At the same time the public is well aware of Deutsche Börse's bid for the London Stock Exchange and the repercussions that might entail. PaperJam talks to CEO Jeffrey Tessler about the outlook for Clearstream in the immediate and far ranging future.

The honeymoon period is over. You're now on active duty. What was your first order of business?

"Customers! Without them we're nothing. Key for me was to understand how Clearstream's customers felt. The company originated years ago from a market-driven requirement to create a trusted service provider to the International Debt markets. What people wanted then is the same as now: a service provider with the expertise to deliver competitive, high-quality services. My first order of business was to use my own background and the views of customers to bring internally the high level of support and appreciation that the market has for Clearstream.

What do you think are the biggest hurdles to overcome? Public perception'

Public perception is a funny thing. Naturally, as we have no contact with the public in terms of business, most people in Luxembourg don't really understand what Clearstream is. We are a cornerstone of the international capital markets with a growing influence through Deutsche Börse Group. Some people say Luxembourg is lucky to have Clearstream but I think the opposite. Clearstream is lucky to be in Luxembourg for all the many business and workforce advantages that brings.

This is a changing industry - never more so before than now. But that's not a reason for concern - it must be seen as an opportunity. We're extremely well placed to extend our position as the change period continues.

Competition for business between Clearstream and Euroclear has a 35 year record of being very tough. That will continue and is likely to increase. Competition is what keeps us going and we must fight for every morsel of business.

What special qualities can you bring to your role as CEO?

I'm an American from New Jersey where I grew up, did my education and entered the financial industry. I've been lucky to have a career path that at various stages involved being a dealer, a credit specialist and then I got into the wider area of Securities Services but all at the Bank of N.Y. Eventually I became head of Bank of N.Y. Europe based in London for about 6 years just before coming here.

There are many differences between the U.S. and Europe. In terms of your "qualities" question I can say that I have developed businesses in both areas which I am sure will now continue at Clearstream.

Luxembourg Acts as a Role Model

How would you describe your CEO style? How have you found the atmosphere here so far, both within the company and in Luxembourg?

I like to be very human. I prefer to wander down the corridor and talk to people than forever be tied to emails. This is a human business. Despite all the technology - it's people that make the difference. Clearstream is a special company due to the incredible international mixture of people but also that of the clients served. Our people deal with customers in over 90 countries every day of the week. I find it fascinating to listen to everyone's story about how they came to be here - it's quite a collection.

Hot topics at the moment are the Lisbon Agenda and working towards a stronger more unified European market place. How does an American view all these political debates?

Europe is now a wonderful example of people living together, but we must never forget how divided it used to be. Luxembourg acts as a role model to other countries in that respect. More than ever, it clearly plays a key role in the move towards closer union. I'm no expert on the Lisbon Agenda but it's a very business-minded approach. I appreciate the extra focus on it at present given by Mr Barroso. Europe must understand that it is business success that dictates future prosperity and there are some significant challenges to creating sustainable businesses. We all live in a global world and competitive forces do not respect geographic boundaries. I'm afraid that Europe still has a lot to learn from the U.S. and from Asia when it comes to competitiveness but let's not get too political.

Plenty of Room for Competition

Is there room in Europe for two big Clearing Houses?

Absolutely. The market wants competition between two service providers who fight each and every day to get business. That process drives service improvements and product innovation. Taking the step to create a European wide utility would be a grave mistake. In the U.S. there was a similar debate in what is known as the FedWire eligible securities arena which is basically the trading environment for U.S. Treasuries.

A huge market, it handles over 500,000 transactions a day with a value approaching USD 2 Trillion. Clearing and Settlement are provided by two commercially-run competing companies - the Bank of N.Y. and JP Morgan Chase. In 1997 the decision was taken to keep this structure because, without the level of professionalism and the competition between these two players, the level of efficiency would be severely undermined. Europe needs to learn that lesson and not make a mistake that it would regret later.

A white paper on the European post trade market has appeared on the front of the Clearstream/DB web site. Is Clearstream planning to become more vocal again on industry topics?

There's no need to turn it into a publicity campaign but we're very actively involved in the many working groups focused on this subject. Let me give you a recent example. Last month, I presented a full overview of this subject to a large collection of E.U. Commissioners and Ministers in Brussels who understandably are looking closely at this subject. My message on that evening was very clear - competition is the only way. On the same day we published a white paper on this subject so I guess you can say we are becoming more vocal in this area.

Let's talk about the outstanding performance of Clearstream's Global Securities Financing Services (GSF). "Increasing settlement efficiency and lowering financing costs" should be music to everyone's ears. Can you compare settlement efficiency and costs in Europe versus the U.S.?

Our GSF services have shown outstanding growth in 2004 with a further jump in 2005 of about 20% already. Success here is dictated by service levels and product innovation plus the importance of relationship. Here Clearstream excels. We continue to win industry awards for this product area. That's important because the growing need for collateral management services is a key differentiating element for us. There are lessons to be learnt from the U.S. (such as my Fedwire example of before) and I hope I can help in that process. But the real challenge that lies ahead for Europe is the harmonisation challenge. 80% of costs in this area are related to the many different legal, tax and regulatory aspects that Europe has still to deal with.

How have you found living and working in Luxembourg and in Clearstream'

The new building is a great step forward. I hear stories about when Clearstream had 17 buildings across Luxembourg which must have been pretty chaotic.

One thing that strikes me about working in Luxembourg which you never see in N.Y. or London is the mix of professional and personal lives. Several times already I've had business meetings with people during the day and then later I've met them again at the movie theatre or even at Auchan. That's great as it makes the relationship deeper in a certain kind of way.

Anything new in the works at Clearstream'

2004 was a good year for us and 2005 has started very well. We are working very hard on subjects that rarely grab the headlines, but this business is about operational service. That's our focus. There are two things I should mention relating to Luxembourg. We have recently become a "Professionnel du Secteur financier" (PSF) and here we want to offer our proven expertise in the IT area to a wider audience of local financial institutions. Clearstream has a technology capability already used by 2,500 customers across the world and we see an opportunity of extending this more locally. Then in September we host our 10th annual Global Securities Financing Summit here in Luxembourg which has become a fixture in the calendar for over 500 people."