Luxembourg – The European Union’s Economic and Financial Affairs Council (Ecofin) has released a statement on the reform of clearing and settlement. The document comes after Ecofin’s June 3 meeting discussing issues such as the industry code of conduct, barriers to harmonisation, and the European Central Bank (ECB)’s Target 2 Securities (T2S) settlement platform.
The Ecofin publication welcomes the final phase of the code, which came into force on January 1, and stresses the importance of the private sector fully implementing the code and transposing its benefits to the retail side of the chain. Progress with the code has however been inconsistent, with significant barriers to interoperability in particular on the sharing of risk in central counterparty (CCP) clearing.
Ecofin says it welcomes the European Commission’s timeline for removing the 15 Giovannini Barriers according to its Third Progress report. The barriers were identified in 2003 as obstructing market harmonisation, with a deadline for their removal set for 2011. The publication says it will welcome the advice of the Legal Certainty Group, which will conclude next month.
The Ecofin document then invites the Commission and the Committee of European Securities Regulators (CESR) to evaluate whether the industry has been able to exercise the post-trade benefits afforded by last year’s Markets in Financial Instruments Directive (Mifid) and to launch concrete proposals to address legal barriers. However, many of the remaining Giovannini obstructions are not reliant on private industry but rather on national, legal and regulatory authorities to address – and progress has been especially slow from many member states.
On the subject of the ECB’s planned T2S platform, Ecofin laid out a number of expectations for continued political support in the Eurosystem. The platform will provide cross-border and domestic settlement of securities against central bank money and servicing the Central Securities Depositories (CSDs). Ecofin’s considerations include trimming down cost and time, and exploring the advantages of establishing a new legal body to address market needs and limit conflicts of interest. Interested CSDs are expected to take clear and unambiguous positions with regard to T2S, although many have been afraid to commit for fear of losing business.