European Commission - Press release
Commission acts to increase the safety and efficiency of securities settlement in Europe
Brussels, 7 March 2012 - As part of its ongoing efforts to create a sounder financial system, the European Commission has proposed today to set up a European common regulatory framework for the institutions responsible for securities settlement, called Central Securities Depositories (CSDs). The proposal will bring more safety and efficiency to securities settlement in Europe. It also seeks to shorten the time it takes for securities settlement and to minimise settlement fails.
Commissioner for Internal Market and Services Michel Barnier said: "I am committed to ensuring that all financial markets are properly regulated and supervised. Settlement is a crucial process for the securities markets and the financing of our economy, and as such its safety and efficiency needs to be ensured. The numbers speak for themselves: in the European Union, transactions worth over one quadrillion euro were settled by CSDs in the last two years. Today's proposal will introduce, in line with our international partners, common standards across the Union for securities settlement and CSDs to ensure a true single market for the services provided by national CSDs."
The proposal contains the following key elements:
The proposal now passes to the European Parliament and the Council (Member States) for negotiation and adoption.
Settlement is an important process, which ensures the exchange of securities against cash following a securities transaction (for instance an acquisition or a sale of securities). CSDs are systemically important institutions for the financial markets because they operate the infrastructures (so-called securities settlement systems) that enable the settlement of virtually all securities transactions. CSDs also track how many securities have been issued, by whom, and each change in the holding of such securities. Finally, they play a crucial role for the financing of the economy, as almost all the collateral posted by banks to raise funds flows through securities settlement systems operated by CSDs.
However, CSDs are still regulated only at national level, and cross-border settlement is less safe (failure for cross-border transactions can reach up to 10% in certain markets) and efficient than domestic settlement: costs are up to four times higher.
The proposed Regulation will complete the European regulatory framework for securities markets. There are three main steps in securities transactions:
Trading – this is regulated by MiFID
Clearing – this will be regulated by EMIR
Settlement – this is addressed by today's proposal
See also: MEMO/12/163