Navigation path

Left navigation

Additional tools

Other available languages: FR DE


Brussels, 15 December 2005

Securities trading: Commission evaluation of Settlement Finality Directive

The European Commission has published an evaluation report on the Settlement Finality Directive (1998/26/EC), which aims to reduce the risks of participation in payment and securities settlement systems, especially when a participant in such a system becomes insolvent. The report is based on Member States' replies to a comprehensive questionnaire and will be presented to the Council and European Parliament. The report concludes that the Directive is functioning well and that Member States are satisfied with its effect. The Directive increases protection against risks and establishes legal certainty and predictability for both domestic and cross-border system participants. However, given recent technical developments and increasing levels of cross-border activity, there may be a need to clarify and perhaps simplify the Directive, to ensure that the law keeps pace with changes in the financial markets. The report identifies ten main issues that should be studied, to see whether the functioning of the Directive could be perfected. During 2006 the Commission will consult Member States, industry and the European Central Bank on these issues.

Internal Market and Services Commissioner Charlie McCreevy said: "We need to ensure that the payment and securities settlement systems that lie at the heart of our financial markets are safe and secure. The current settlement finality structure works well. However we will work closely with Member States, industry and the ECB to Establish if it is appropriate to adapt the directive once we have looked at the issues that are to be subject of review.

Settlement Finality Directive

The Settlement Finality Directive was the EU's response to the need to minimise systemic risk and to ensure the stability of payment and securities settlement systems, especially in light of Economic and Monetary Union (EMU). It provides that transfer orders entered into these systems cannot be revoked or otherwise invalidated, even when a participant in the system becomes insolvent. Making these transfer orders legally binding and enforceable contributes to the stability of settlement systems and thus to stability of the financial sector as a whole.

The Directive specifies (Article 12) that the Commission should produce a report on the Directive and, where appropriate, propose revisions to it.


Payment systems are highly automated computerised arrangements through which payments of money, usually in large amounts, are effected. Securities settlement systems perform a similar function in relation to transfers of securities and are where market trades are usually executed and recorded.
The evaluation report is available at:

Side Bar