05 February 2009

Responses on CESR/ESCB draft recommendations for securities settlement systems and CCPs

Banking organisations welcome that the recommendations exclude from scope custodian banks and are limited to CSDs and CCPs. The LSE, however, criticises that the recommendation is written as if the settlement cycle was governed by the CSD.

Banking organisations such as the BBA and EAPB welcome that the recommendations exclude from scope custodian banks and are limited to Central Securities Depositories (CSDs) and Central Counter Parties (CCPs). The systemic risks involved in the provision of post trading services by CSDs and CCPs can not be compared with risks arising out of services provided by custodians, the associations argue.

 

The EBF however advocates caution, in respect of the recommendations being used as the de facto basis for a European passport in the post trading space. “Much will depend on how the Recommendations will be taken up by supervisors in practice and how far this process achieves genuine comparability for the purposes of achieving a mutual understanding of the forms, functions, and legal bases underpinning central infrastructures”, EBF says.

 

As for the exchanges, FESE suggests that the passages relating to the Code of Conduct for Clearing and Settlement (par 21) in the introduction of the draft recommendations acknowledge that the Code is an industry-led initiative rather than public. FESE members would also like to obtain further clarification on the timeline and co-operation between supervisors expected in the future evaluation of these recommendations.

 

The LSE criticises, among others, that the recommendation is written as if the settlement cycle was governed by the CSD. “This is not the case for on-exchange trades where the settlement cycle is a term of the trade and is therefore governed by the rules of the exchange”, LSE states. “It is therefore inappropriate to measure a CSD against something over which it may have no control.”

 

Companies like Eurex and Clearstream refer to the ongoing work of the European Central Securities Depositories Association in co-ordinating with the Americas’ Central Securities Depositories Association and the Association of Global Custodians in developing a unique Central Securities Depository disclosure framework.

 

Finally, Euroclear urges ESCB and CESR to finalise and implement the recommendations swiftly, underlining that supervisors and regulators make a strong commitment to use the recommendations as the basis of their assessment of CSDs and CCPs and to use such assessment as the basis for mutual recognition of the CSDs and CCPs. Euroclear also calls on the ESCB and CESR to review the assessment methodology in such a way that it becomes clear which requirements apply to CSDs and which ones apply to other entities.

 

All responses available here

 

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