16 October 2002

EP Committee Working Document on Clearing and Settlement

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The Parliaments Economic and Monetary Affairs Committee released a Working Paper on the forthcomming report on Clearing and Settlement responding to the Commission Comunication released in May. Rapporteur Generoso Andria wants to encourage a debate before coming to any conclusions.

One option debated is the creation of 3 Central Securities Depositaries (CSD) which carry out settlement functions - one for the UK market, one for central Europe and one for southern Europe. The CSDs should only provide core services within special utility entities. There should be a separation of their functions between the commercial ('value-added services' services) and the non-commercial functions ('core' services).

Alternatively, the current market and legal barriers could be swept away creating optimal market conditions, without necessitating a reshaping of the entire current architecture. The market could introduce appropriate solutions where possible, with risk-based proportionate legislation only where necessary.

Other points discussed:

it is discussed if the legal structures of clearing and settlement should be 'profit' or 'non-profit', and if an effective corporate governance could ensure the public interest of users in terms of access, choice and interoperability.

barriers related to national restrictions on the location of clearing and settlement systems and national restrictions are the most harmful of the barriers. Tax barriers will be a particularly difficult area to resolve. Several market barriers could be dealt with by co-ordination by market organisations.

the creation of a single Securities Code could appear too ambitious a goal in regulatory terms. Alternative proposals could include the creation of a list of legislative barriers in national markets providing information to suppliers of cross-border transactions.

the European Central Bank will possibly to play a role as an overall coordinator of supervision amongst Member States.

Working Document on Clearing and Settlement
Commission Communication on Clearing and Settlement

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