Summary

In the words of the 2001 Giovannini Report, the ‘clearing and settlement process is an essential feature of a smoothly functioning securities market, providing for the efficient and safe transfer of ownership from the seller to the buyer’. As a priority under the Financial Services Action Plan the Commission is studying how to ensure the development of an efficient and secure clearing and settlement structure in the EU. Following the Giovannini Report a Commission Communication in May 2002 launched a consultation on how to develop possible solutions, including possible EU legislative action. The European Parliament recently adopted a Resolution calling upon the Commission to take legislative initiatives that would require structural changes to the current infrastructure. The benefits of a better functioning clearing and settlement system are evident for the integration process in Europe; the question is what is the right balance to be struck between market-led action and user/owner initiatives, and legislative action to remove costly barriers.

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Clearing and Settlement in the EU: What Needs to be improved?

By and large, national structures for clearing and settlement in the EU Member States are cheap and efficient. In contrast, over recent years, a gap in efficiency has appeared in clearing and settlement at international level (known as “Cross-Border”), particularly in relation to equities. This has been highlighted in a number of reports, including the First Giovannini Report on Clearing and Settlement in the EU. (see note1)