13 April 2005

Group of Thirty Interim Report on Global Clearing and Settlement

The Group of Thirty's Monitoring Committee on global clearing and settlement released an interim report of progress on the 20 recommendations set out in the January 2003 G30 report “Global Clearing and Settlement: A Plan of Action.” The report reviews progress in achieving higher standards of technical performance, better business practice and stronger governance intended to produce an interoperable, safer and more efficient international system for securities clearing and settlement. The report notes substantial progress on the reform agenda, although it acknowledges that considerable work remains.

In the area of interoperability, progress is being made in creating a global network. This is most evident across Europe, where a single financial market is being pursued, but also in other countries where solutions are also being achieved, though largely through domestic action. Coordinated timing among systems is well advanced within markets; Central Counterparties (CCPs) are in place and functioning; and securities lending is generally available. Less progress is evident in creating global standards for reference data, messaging and communications or eliminating paper from the clearing and settlement process. In these complex areas, the Committee will encourage targeted solutions by major infrastructure providers with a shared interest in, and the ability to implement, international standards.

In the risk management sphere, business continuity and disaster recovery planning show clearest signs of progress as the implications of a large-scale market disruption have been carefully considered and substantial improvements made. Progress is also evident on the broader risk management agenda but ensuring the recommendations are fully implemented will require greater transparency regarding risk management policies and procedures by firms, and independent validation by those who supervise and regulate financial markets. Reducing legal risk depends on improvements in law and regulation, and the Committee looks to the International Swaps and Derivatives Association (ISDA) and the Global Documentation Steering Committee for continuing leadership on standardizing contracts, and to intergovernmental organizations like UNIDROIT, The Hague Conference on Private International Law and UNCITRAL to take the lead in promoting harmonization of laws.

In the governance area, boards and management show a clear understanding of the need for experienced and appropriate board membership and guidelines are being adopted by infrastructure providers. Meanwhile more work is needed to ensure that user interests are given equitable and effective attention and to provide remote access to services for cross-border users in some markets. There is a clear regulatory framework in place within each country to provide necessary oversight and cooperative efforts are underway across markets, although there is still room for progress toward achieving complementary and consistent standards of regulation.

The Committee will meet next in June 2005 and will agree its priorities for the evaluation and encouragement of progress ahead of publication of a final monitoring report in early 2006. The final report will detail the work that remains to be done to achieve the full benefits of the G30 reform agenda and provide a clear indication of specific responsibilities for follow-up.

Executive Summary
Interim Progress Report

© G30