-A European Commission consultative Communication published today considers the need for EU level measures to improve clearing and settlement, in other words the procedures by which transactions in securities and derivatives are finalised. Efficient cross-border clearing and settlement is essential to allow market participants to operate effectively in an integrated EU financial market. The Communication identifies two main objectives:
removing barriers to the finalisation of individual cross-border transactions and
removing any competitive distortions that prevent market forces from delivering a more efficient infrastructure for cross-border activity.
The current cross-border arrangements in the EU are complex and fragmented, imposing costs, risks and inefficiency on investors, institutions and issuers. As a result the costs of cross-border clearing and settlement in Europe are much higher than in the United States. The Communication sets out, for the first time, overall Commission policy on this subject and presents possible courses of action to improve the cross-border post-trading environment. Responses are invited by 31 August 2002.
The Communication considers the current arrangements for clearing and settlement in the EU and sets out some policy objectives to achieve further integration, along with possible measures to realise those objectives. It contains a number of specific questions to which the Commission seeks responses as well as inviting comment on the overall approach.
The Communication does not address the question of what form of market infrastructure is needed in the EU. Rather, it examines how to create the conditions needed for market forces to deliver the most efficient solution. Clearing and settlement are vital processes for investors and institutions and for the smooth functioning of the financial market as a whole.
A number of obstacles increase the cost, complexity or risk involved in the finalisation of cross-border transactions compared to those in the domestic market. The Giovannini Report identified 15 such obstacles, subdividing them into three categories:
technical/market practice
tax procedures
legal certainty
The Communication considers how each of these sets of barriers can best be removed, and by whom. Interested parties are asked to comment on a number of possible measures and to identify the priorities.
Press release
Consultation Document: 'Clearing and Settlement in the European Union: Main policy issues and future challenges'
© European Commission
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