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Executive Summary
The existing clearing and settlement processes in Europe are reasonably efficient in isolation, however, from a cross-border perspective, fragmentation makes the whole unnecessarily inefficient.
Our overriding concern is that we have safe and efficient clearing and settlement processes (capable of supporting long-term growth) to support a competitive pan-European capital market.
Although much has been said and written about the need to rationalise and improve the process, little has actually been achieved.
The absence of an agreed vision of the necessary infrastructural, legal, fiscal and regulatory change and, most importantly, the way to achieve that vision results in inertia, and vulnerability where those involved continue to commit scarce technical resources to support developments across multiple external systems.
We believe that the core processes of clearing and settlement are natural monopolies that should be owned and governed by the users.
Access should be open, equitable and transparent. Those that wish to use intermediaries should be free to do so.
The operational design of the clearing and settlement utilities will require much careful thought to balance risk and cost.
Added value services should be open to the full forces of competition.
More than anything the markets must avoid embedding the inefficiencies of yesterday’s approach to European clearing and settlement yet further into their systems.
We welcome regulatory attention in this area, as there are 3 key areas where only public sector intervention can remove barriers to consolidation:
- Harmonisation of securities law such that a market participant can easily determine their rights with certainty. A market participant’s claim on its securities and any associated benefits must be beyond challenge. That certainty should not be diminished through the use of intermediaries, e.g. custodians. The process of enforcing those rights must be clear and unambiguous. The point of settlement finality for both securities and funds must be obvious and universal.
- A harmonised process of tax reclamation that minimises the administrative costs to the underlying owners, investment managers, broker dealers, global custodians and the fiscal authorities.
- A common and proportionate regulatory framework
Level 3 Committee for the Securities and Asset Management Industries
www.cesr-eu.org',WIDTH, 300, SHADOW, true, FADEIN, 300, FADEOUT, 300, STICKY, 1,DURATION,3500)" onmouseout="UnTip()");">CESR ECB paper1.doc' target='_blank'>Full paper
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