-The European Central Bank (ECB) has agreed to a request from the ACI, the Financial Markets Association, to host on its behalf a consultation on how the European short-term securities markets can be further integrated.
The integration of Europe's financial markets is a prerequisite for reaping the full benefits of the single currency, in particular by facilitating an optimal allocation of capital across the European Union. The markets for short-term securities are comparatively less integrated than other segments of the euro-denominated money market, and private sector initiatives aimed at improving the current situation are welcome.
The following documents are available:
a document outlining the aim and procedure of the ACI consultation ;
a report entitled 'The Short-Term Paper Market in Europe' , prepared by the EURIBOR-ACI;
a report entitled 'The Money Market: Legal Aspects of Short-Term Securities' , prepared by the European Financial Markets Lawyers Group (EFMLG) in support of the ACI initiative.
Documents can also be downloaded from the ECB web site
Interested parties are invited to send their contributions to the ECB by 30 November 2002 (postal or by email under short-term@ecb.int)
Summary of the Documents
ACI Consultation
ACI STEP is inviting all interested parties to provide comments on the conclusions and
recommendations included in its report entitled “The Short-Term Paper Market in Europe”.
ACI STEP also invites all interested parties to put forward any additional information or
initiative susceptible to facilitate collective action by the participants in the European short-term
securities markets, with a view to achieve the development and integration of these
markets.
ACI STEP finally invites all interested parties to identify the obstacles to the integration of
the market that they cannot be eliminated by free competition or by collective action, but
would require an active involvement of legal and/or regulatory authorities. ACI STEP intends
to formally convey these concerns to the relevant authorities at the end of the consultation
process.
EURIBOR-ACI report: 'The Short-Term Paper Market in Europe'
Summary of recommendations:
all domestic markets use a standard format for the Information Memorandum of Commercial Papers, and a translation in English should be available.
the English version should be available at the ECB, and a yearly review should be implemented in order to update the presentation of the issuer.
creation of primary index on short term paper issues, calculated by the ECB, in order to improve the transparency of the market.
the ECB to be in charge of collecting and publishing statistics on the STEP market and to elaborate indices as described below.
under certain conditions Euro Short Term Papers should be eligible as Tier 1
Short Term Papers should be classified in the same way in each transposition of the UCITS directive so that they could be purchased without restriction by UCITS, independently of the country of residence of the UCITS, of the issuer and of the dealer.
Short Term Papers should be excluded from the proposed Prospectus Directive and its national transpositions.
same day settlement should be possible for all domestic and cross border transactions in Medium Term.
domestic legislations in the Euro-zone adopt a common format for the market.
EFMLG report: “The Money Market: Legal Aspects of Short-Term Securities”
Excerpt of summary:
The present Report contains a legal analysis of the short-term securities most used in the money market, namely, certificates of deposit (CDs), commercial paper (CP), and medium-term notes (MTNs). The Report has been prepared by a Sub-Group of the EFMLG on legal aspects of short-term securities in support of the work in this field of the Money Market Contact Group, the Euribor ACI and the Short Term Paper Task Force.
The Report details the differences in the legal, regulatory and taxation regimes, as well as the market documentation, that still separate the national markets for short-term securities. It places special emphasis on CP markets. The findings of this Report and its Annexes indicate that the main legal barriers to the integration of the short-term money market are the differences between jurisdictions with regard to:
(1) the national legal definitions,
(2) the legal specification of the entities authorised to issue such securities,
(3) the minimum amount required for the issue,
(4) the obligation, or lack of obligation, to file prospectuses,
(5) the withholding tax applied to interest payments,
(6) the capacity of UCITS to invest in such securities, and
(7) the degree or intensity of regulation and supervision.
The EFMLG draws the attention of Member States and of the European Community to these issues, and recommends urgent action. Differences in standard market documentation need to be revised and new harmonised standards agreed. The recommendations at the end of this Report indicate the required legal actions to achieve the desired integration of these markets. These recommendations are put forward under the assumption that “integration of markets” require a legal and regulatory level playing field, i.e. the same rules across the euro area, so that these short-term financial instruments are equally available to economic agents throughout the single currency area.
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