Local view for "http://purl.org/linkedpolitics/eu/plenary/2003-01-14-Speech-2-246"
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"en.20030114.7.2-246"2
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"Mr President, Commissioner, ladies and gentlemen, in financial markets, where the liquidity of the market is closely related to the confidence operators have in the reliability of securities payment and settlement systems, the inefficient operation of the latter can represent a source of risk for the markets themselves. Reliable payment and settlement systems require a clear legal framework, rules and procedures to govern securities holding, transfers, lending and related payments, as well as the imposition of constraints on these securities. Clearing and settlement, essential components of all securities transactions, are therefore fundamental to the smooth functioning of integrated financial markets. In any case we should note that, despite the increased demand for foreign securities, not only does the EU’s infrastructure for clearing and settlement for cross-border transactions remain fragmented to a high degree, but there is also an excessive and certainly not controlled incidence of costs at cross-border level. In any case, in order to attain specific objectives, it is necessary to know what the operational situation in the sector is, in order to make the appropriate adjustments.
There are two main reference markets: the United States and Europe. The USA has opted for the Depository Trust and Clearing Corporation, which incorporates both clearing and settlement systems and is overseen by a single managerial body, whose proven efficiency has led to substantial cost reductions. The European model with as many as 20 CSDs is fragmentary, benefiting from the fact that competition is only limited to securing new areas of influence. There has never been a price war, as market liquidity is controlled by a single active player.
From an analysis of the existing framework and from the thorough research undertaken by the Giovannini Group, it is clear that there are a range of technical, legal and taxation barriers at the root of the high costs and inefficiency. Removal of the technical barriers has to be our prime objective and can be considered easily attainable. Standardising information technology languages and paper-based documentation does not, in fact, require a particular operational effort. There would certainly be greater difficulties in harmonising legal and taxation rules. We should aim to achieve the ambitious objective of creating a single securities code, which would constitute a real guarantee for operators; but it would certainly be difficult for Member States to reach agreement on this issue, for delicate and sensitive reasons linked to the differences between legislation governing property rights, company law and insolvency law. Therefore, the creation of this code must be considered a long-term objective. In the short term, an information statement should be drawn up which would provide market participants with a guide to the differences between the laws in the Member States. With regard to taxation barriers, the difficulties do not stem only from the differences between systems but also from strong resistance to change and harmonisation by some Member States.
Starting with the need to reform the post-trading environment, with the aim of eliminating confusion between infrastructures and functions and destroying existing natural monopolistic positions, there must be an arrangement for core settlement services managed for legal purposes as a user-owned service governed by the rules of non-profit status. This option would guarantee market integrity, ease of access to the service by users and effective supervision with regard to operational risks. There could not be any distortions of competition, because this guarantee stems from the fact that the services user participates in managing the body. Innovation and technical progress could also be attained since the arrangement in paragraph 11 of the report specifies that non-profit status comes after allowing for necessary investment needs.
Separation of core services and value-added services is considered vital. The latter could, in any case, be performed by central depositaries but with separate structures, including from a logistical point of view, by means of shared or supervised companies. The clearing and settlement service encompasses guarantee, margining, clearing, settlement and regulation activities. A quick read through reveals that these are all public utility services. The added-value services offered by banks or structures separate from depositaries are securities lending, collateral management, cash management, corporate actions, income management
and taxation services: all purely commercial activities.
In conclusion, it is also vital to have strong cooperation between the States in order to ensure adequate supervision."@en1
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