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Brussels, 18th December 2002

Clearing and settlement: financial markets and public authorities welcome Commission approach

The European Commission has published a summary of the 61 responses it has received to a consultation on clearing and settlement vital processes by which transactions in securities and derivatives are finalised. The consultation, launched in May 2002 (see IP/02/797), sought views on the need for EU level measures to ensure efficient cross-border clearing and settlement, which is essential to allow market participants to operate effectively in an integrated EU financial market. Respondents welcomed the consultation, the first on this subject by the Commission, and were supportive of the policy objectives it contained: removing barriers to the finalisation of individual cross-border transactions and removing any competitive distortions that prevent market forces from delivering a more efficient infrastructure for cross-border activity. The Commission will consider the responses, along with other public and private sector initiatives, and will subsequently come forward with a policy paper setting out the further steps it intends to take. A summary of the consultation responses is available on the Europa website at:

Internal Market Commissioner Frits Bolkestein, said: "I am very pleased with the high quality of the responses to this consultation. They will help the Commission to decide how it can contribute to providing cost-effective, competitive and safe clearing and settlement in the EU. Without that, citizens, businesses and investors will not reap the full benefit of an integrated EU financial market. This is becoming ever more apparent as we move closer to completing the Financial Services Action Plan."

Positive response

The Commission received 61 responses to the consultation, from 16 countries in total, including 14 Member States. Responses were received from:

  • Member State public authorities, including supervisors and central banks

  • market operators, including financial institutions, stock exchanges, clearing houses, settlement systems, custodians and from associations representing each of these categories.

Respondents agreed with the Commission's assessment that efficient EU-wide clearing and settlement processes are vital if the EU is to succeed in creating a true internal market for financial services. They welcomed the Commission Communication on which the consultation was based as a step forward in the debate on how best to deliver this goal.

The main areas of comment were:

  • how best to tackle the removal of technical, legal and tax barriers to efficient cross-border securities transactions

  • how to create a level playing field for all parties providing and using clearing and settlement services

  • how to ensure open and equitable access to these services throughout the EU

  • whether there is a need for an EU Directive governing these activities.

Next steps

The Commission will consider the responses to the consultation, including the Report of the European Parliament, which is due to be adopted at the January 2003 plenary. It will also await the publication of the second report of the Giovannini Group of financial experts advising the EU on capital market issues, due early next year. The first Giovannini Report on Cross-Border Clearing and Settlement, presented to the Commission in November 2001, provided a description of the cross-border clearing and settlement environment in the EU (IP/01/1654). This report highlighted the complexity and degree of fragmentation in the cross-border post-trading market.

The Commission will then publish a policy paper, in which it will set out any measures it considers necessary to achieve the objective of integrated, competitive, safe and cost-effective clearing and settlement in the EU.


Clearing and settlement is the term used to describe collectively the processes required to finalise a transaction. These are the confirmation of the terms of the trade, calculation of the amounts due (clearing), the possible involvement of a central counterparty, the delivery of securities against payment of cash (settlement), safekeeping of securities in custody, and registration of the change of ownership, if applicable.

On 28 May 2002, the Commission launched its consultation on the basis of its Communication: "Clearing and Settlement in the European Union Main Policy Issues and Future Challenges" (IP/02/797). The Communication considered the current arrangements for clearing and settlement in the EU and identified ways in which these fall short of the requirements of a single market.

The current cross-border arrangements in the EU are complex and fragmented, imposing costs, risks and inefficiency on investors, institutions and issuers. As a result the costs of cross-border clearing and settlement in Europe are higher than in the United States.

The Communication set out two policy objectives to achieve further integration across the EU, along with possible actions to achieve those policy objectives. The policy objectives were:

  • first, to remove barriers to the finalisation of individual cross-border transactions in the EU

  • second, to remove any competitive distortions that would prevent market forces from delivering a more efficient infrastructure for cross-border activity.

The Communication contained a number of specific questions, as well as inviting comment on the overall approach.

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