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EC Posts Progress Report On Tackling Cross-Border Securities Clearing Barriers

by Ulrika Lomas,, Brussels

10 December 2008

The European Commission has issued a comprehensive report on its four years of work on removing industry-related barriers to the cross-border clearing and settlement of securities transactions.

The report, published by the European Commission's Clearing and Settlement Advisory and Monitoring Expert Group (CESAME), gives a concise overview of all the work done by the industry to dismantle the six industry-related "Giovannini Barriers" to post-trading and of the state of play on the nine such barriers attributed to the public sector.

Internal market and Services Commissioner Charlie McCreevy said:

"The CESAME Group has played a crucial role in efforts to remove these barriers to post-trading, which should ultimately lead to lower costs for European businesses. Its report shows clearly the achievements and the remaining shortcomings within this crucial sector, and I particularly welcome the standards that the Group has promoted. This thorough stock-taking fits well into the Commission's efforts to advance to a more efficient and secure European post-trading environment. It is also a good example of how stakeholder consultation works within the framework of better regulation."

The CESAME Report encompasses the whole range of the Group's work. It provides a picture of the multiple aspects influencing the post-trading sector, the standard-setting achieved so far, the implementation of these standards and the implications of the public sector on industry work. It also highlights outstanding issues which still have to be tackled by the various entities involved.

The Commission stated:

"Overall, there is noticeable progress on dismantling industry barriers. Effectively, industry Barrier 8 (securities number issuance) has been successfully dismantled. Very good progress has been achieved on industry barriers 4 and 7 (settlement finality and settlement deadlines) but further issues in this area have been identified (now treated under "Barrier 16"). Standard setting for removing industry barriers 1 (IT interfaces) and 3 (corporate actions) has advanced substantially; but implementation will have to be monitored closely. This leaves mainly Barrier 6 (standard settlement periods) - which was initially deemed less important - for the industry to tackle.

"Less progress has been achieved regarding public sector barriers, therefore industry called for more involvement of member states and regulatory authorities in the work of CESAME2. In this area, public sector Barrier 14 (on netting) and Barrier 5 (remote access) have been dismantled and the implementation of the MiFID (Markets in Financial Instruments Directive) as well as the work of the FISCO and the Legal Certainty Group has provided progress and the basis for further work. However, the public sector still has to start active standard setting and implementation."

The integration of European securities post-trading systems is intended to make cross-border clearing and settlement of transactions as efficient, safe and cost-effective as at national level, and requires coordinated action by private and public sector bodies. Against this background, the CESAME advised from 2004 to 2008 on the coordination of action between the public and private sectors and on practical aspects of removing the “Giovannini” Barriers for which the private sector has sole or joint responsibility. It also assisted the Commission in making all market participants and service providers aware of ongoing developments and in transmitting the overall objectives and direction of the project to the market at large.

According to the Commission, this work "contributed substantially to building awareness of the importance of the project for the success of the EU’s financial markets and for attaining the overall economic objectives incorporated in the Lisbon agenda." The group also monitored the results of the process to help the Commission ensure that its own efforts would keep pace with private sector reforms and developments.

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