ecsda and the european challenges in the post trading industry n.
Skip this Video
Download Presentation
ECSDA and the European challenges in the post-trading industry

Loading in 2 Seconds...

play fullscreen
1 / 61

ECSDA and the European challenges in the post-trading industry - PowerPoint PPT Presentation

  • Uploaded on

ECSDA and the European challenges in the post-trading industry. ACSDA General Assembly Panama City- 22 February 2008. Joël Mérère, Chairman of ECSDA. Agenda. What’s new in the life of ECSDA The Code of Conduct Target2 Securities The Giovannini barriers

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
Download Presentation

PowerPoint Slideshow about 'ECSDA and the European challenges in the post-trading industry' - rane

Download Now An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
ecsda and the european challenges in the post trading industry

ECSDA and the European challenges in the post-trading industry

ACSDA General Assembly

Panama City- 22 February 2008

Joël Mérère, Chairman of ECSDA

  • What’s new in the life of ECSDA
  • The Code of Conduct
  • Target2 Securities
  • The Giovannini barriers
  • Update of the ECSDA cross-border model
  • Issuer services
  • Regulation of ESCB / CESR
  • Conclusion

What’s new in the life of ECSDA

  • January 2006: merger with CEECSDA
  • January 2008: the Board of Directors unanimously support the setting up of an ECSDA permanent structure (General Secretary / premises in Brussels)
  • Joint KELER / ECSDA initiative to organise the CSD 10 in Budapest
  • January 2008: the Association of European Central Securities Depositories (AECSD) is granted a permament observer status in ECSDA
new ecsda perimeter
New ECSDA perimeter

With 41 members, ECSDA constitutes a key forum for discussion and provides a representative interlocutor for European authorities.

ecsda members
ECSDA members
  • Euroclear France SA
  • Euroclear Nederland
  • Iberclear (Spain)
  • Interbolsa (Portugal)
  • Keler Ltd (Hungary)
  • Latvian Central Depository
  • Malta Stock Exchange (Malta)
  • Monte Titoli SPA (Italy)
  • National Depository for Securities (Poland)
  • National Securities Clearing, Settlement and Depository Company (Romania)
  • Oesterreichische Kontrollbank AG (OeKB)
  • Registry of Securities of the Federation of Bosnia Herzegovina
  • SC Depositarul Central SA (Romania)
  • SIS Group (Switzerland)
  • Stredisko Cennych Papiru (Czech Republic)
  • Suomen Arvopaperikeskus OY (Finland)
  • Takasbank (Turkey)
  • The National Depository Center (Russia)
  • UNIVYC Ltd (Czech Republic)
  • Verdbrefaskraning Islands (Iceland)
  • Vaerdipapircentralen A/S – VP Securities Service (Denmark)
  • Verdipapircentralen (Norway)
  • VPC AB (Sweden)
  • Central Depository Agency Inc (Croatia)
  • Central Depositary Agency, JSC Podgorica (Montenegro)
  • Central Registry Agency (Turkey)
  • Central Registry of Securities JSC-Republic of SRPSKA (Bosnia & Herzegovina)
  • Central Securities Depository and Clearing House (Serbia & Montenegro)
  • Central Securities Clearing Corporation (Slovenia)
  • Central Securities Depository SA (Greece)
  • Central Securities Depository AD (Bulgaria)
  • Central Securities Depository of Lithuania
  • Central Securities Depository of the Slovak Republic
  • Depository Clearing Company (Russia)
  • Clearstream Banking AG (Germany)
  • Clearstream International SA (Luxembourg)
  • CrestCo Ltd (UK) – Euroclear Group
  • Cyprus Stock ExchangeEstonian CSD Ltd
  • Estonian CSD Ltd
  • Euroclear Bank SA
  • Euroclear Belgium

ECSDA organisation

Board of Directors

Kjell Arvidsson (Sweden)

Janacek Bedrich (Czech Republic)

Jesus Benito (Spain)

Stéphane Bernard (Belgium)

Helena Cacka (Czech Rep)

Spyros Capralos(Greece)

Emin Catana (Turkey)

Paolo Cittadini (Italy)

Christoff Lubomir (Bulgaria)

György Dudàs (Hungary)

Adriana Tanasoi (Romania)

Jasminka Djukic (Rep. of Srpska)

Miroslav Dzidic (Bosnia)

Nikolay Egorov (Russia)

Abel C.S. Ferreira (Portugal)

Mark Gem (Clearstream Luxembourg)

Jan Hellstrom (Norway)

Vladimir Kascelan (Montenegro)

Arturas Keleras (Lithuania)

Peter Danko (Slovak Rep)

Johannes Luef (Denmark)

Tim May (UK)

Joël Mérère (France)

Nondas Cl. Metaxas (Cyprus)

Mikhail Laufer (Russia)

Elzbieta Pustola (Poland)

Mathias Papenfuss (Germany)

Remzi Ozbay (Turkey)

Seppo Rantanen (Finland)

Robert Rickenbacher (Switzerland)

Katrin Sagar (Estonia)

Einar S.Sigurjónsson (Iceland)

Guy Schuermans (Nederland)

Boris T. Snuderl (Slovania)

Joseph Zammit Tabona (Malta)

Adriana Tanasoiu (Romania)

Anso Thiré (Euroclear Bank)

Vida Uzelac (Serbia)

Ratis Vancans (Latvia)

Georg Zinner (Austria)

Vesna Zivkovic (Croatia)

Executive Committee

Joël Mérère,Chairman

Mark Gem, György Dudàs, Vice-Chairmen

Vesna Zivkovic,Treasurer

Elzbieta Pustola, Secretary

Kjell Arvidsson, Jesus Benito, Paolo Cittadini, Boris T. Snuderl, Georg Zinner Arturas Keleras,Members








ECSDA organisation (cont’ d)

6 permanent Working Groups

Public Policy

  • EU Commission project on a framework Directive (definitions)
  • ESCB/CESR standards
  • Legal Certainty/Unidroit/Hague
  • T2S Legal/Regulatory issues

Risk Management & Audit

  • Disclosure framework

Settlement Link


  • Matching harmonisation
  • Target2 interface to ancillary systems
  • Update of ECSDA cross-border model
  • Giovannini Barrier 1 analysis
  • Work on the ECSDA DEX to identify the top 5 cases where ISO messages are not sufficient


Removal of 3 of the Giovannini barriers :

7 (opening days and timetables) ; 4 (intra-day finance) ; 3 (corporate actions processing).

Information Technology

on hold

ecsda governance
ECSDA governance
  • Board of Directors: 3 meetings/year

Board responsibilities: - strategic discussions

- preparation of annual accounts/budget

- proposal of the annual contribution

- creation and composition of Working Groups

- approval of the Working Groups’ mandates and conclusions

In theory, vote is possible in practice = consensus

In attendance = Directors, Observers and Chairmen of the WGs

  • Executive Committee: 3 meetings/year (in between BoDs’ meetings)

ExCo responsibilities: - follow-up of BoD decisions

- preparation of the next BoD meeting - follow-up the on-going work of the working groups

- any urgent matter that does not require a Board decision

  • Special Interest Sessions (for Directors, Observers and WG Chairs)

- half-day meeting the day prior to the BoD meeting

- objective: sharing experiences or topics of general interest

- Funds - Issuer services – Academics - SWIFT’s communication

protocol (Giovannini Barrier 1) – Target 2 Securities – ESCB/CESR

standards – New initiatives – ...



  • What’s new in the life of ECSDA
  • The Code of Conduct
  • Target2 Securities
  • The Giovannini barriers
  • Update of the ECSDA cross-border model
  • Issuer services
  • Regulation of ESCB / CESR
  • Conclusion


  • “Communication” on Clearing and Settlement issued by the European Commission in April 2004
  • Content of communication:
    • It proposes a framework Directive focusing on rights of access, a common regulatory approach (ESCB/CESR) and governance
    • It is explicit in stating that the Directive should not deal with functional separation or structural issues
    • It recognises that clearing and settlement services are provided by a broad selection of institutions (functional approach)
    • It addresses fragmentation issues as identified in the Giovannini reports. The Commission will also set up an advisory and monitoring group to deal with these issues
  • In July 2006, the European Commission decided not to go ahead with a Directive but called for self-regulation of the industry (trading, clearing, settlement through a Code of Conduct
  • BUT, a Directive could still come if Code fails

The Code of Conduct (cont’d)

  • The Code was signed on 7 November 2006
  • 4 main elements
    • Price transparency by end December 2006
    • Establishing access and interoperability conditions by end June 2007
    • Separate accounting of, and unbundling between, trading, clearing and settlement (for vertical siloa), and of the main activities performed by CSDs by end December 2007
    • Procedures for the verification and external audit of the commitments made including a new ad hoc committee to be established by the Commission comprising Public Sector interlocutors

Signatories to the CoC


There is a new signatory of the Code in EACH (EMCF) as well as another new signatory of the Code (Chi-X). These new signatories of the Code and the A&I Guideline should be compliant with all three phases of the Code immediately (no grace period).


The Code - its scope

  • Agreed upon by EU (and some non-EU) Stock Exchanges, CCPs, CSDs and ICSDs
  • “Institutional” approach; it does not apply to intermediaries or agent banks
  • Only applies to signatories
  • The Code covers cash equities but extension to derivatives and other instruments was supposed to be subject to further analysis

The Code – Price Transparency

  • Objectives of price transparency:
    • to enable customers to understand the prices they will have to pay for services, including discount schemes
    • to facilitate the comparison of prices and services
  • Organisations agree to publish:
    • All offered services and their respective prices including applicable terms and conditions,
    • All Discount and Rebate Schemes and the applicable eligibility criteria,
    • Examples that explain prices, as well as Discount and Rebates Schemes for different types of customers or customer groups
  • Organisations agree to apply the published prices
  • All information to be made available at a prominent place on the Organisations’ websites

ECSDA Conversion Table

  • In particular ECSDA has been asked by Users and the European Commission to help understanding the different services and prices of its member CSDs and ICSDs in a comprehensive way in order to facilitate price comparability going forward
  • Therefore, the special ECSDA Taskforce “Price Comparability” has elaborated a Conversion Table and ICSDs in a comparative manner
  • The Conversion Tables show the following details in a concise structure:
    • Service description according to the services listed in the Code
    • Overview which tariff sections in the members’ price schedules refer to which service
    • Clear reference to members’ fee schedule/ tariff brochure
    • Overview of fees charged to customer (issuer/ agent, intermediary, end investor, other)

The Code – Access and interoperability

  • The Code complements the access rights established in MiFID, i.e.
    • The right to access remotely a foreign CCP and CSD
    • The right to choose the settlement location for their trades (provided links are in place)
  • The Code sets out that:
    • CCPs should be able to access other CCPs
    • CCPs should be able to access CSDs
    • CSDs should be able to access other CSDs
    • CCPs and CSDs should be able to access transaction feeds from trading venues
    • CSDs should be able to access transaction feeds from CCPs
    • A trading venue should be able to access a CSD and/or CCP for its post-trading activities
  • Access and Interoperability Guidelines, agreed in early July 2007




Receiving Entity

LCH.Clearnet SA (Portugal)

LCH.Clearnet SA (Belgium)

LCH.Clearnet SA (France)

Clearstream Banking FFM

Clearstream Banking Lux.

London Stock Exchange

LCH.Clearnet SA (NL)

Euronext Amsterdam

Interbolsa (Portugal)

SIS SegaInterSettle

Eurex Clearing AG

Euroclear Belgium

Euronext Portugal

Euronext Belgium

LCH.Clearnet Ltd

Euroclear France

FWB (Frankfurt)

Euroclear UK&I

Euroclear Bank

Euronext Paris

Requesting Entity

Borsa Italiana

Euroclear NL

CC&G (Italy)

Monte Titoli

SIS x-clear






Eurex Clearing AG














LCH.Clearnet Ltd

















LCH.Clearnet SA












SIS x-clear















Clearstream Banking












Clearstream Banking













Euroclear Bank







SIS SegaInterSettle




Status of Access & Interoperability requests*

* Table dd. 18 January 2008; based on information publicly available in the financial press


Good progress madeOutstanding issues

Private sector related dependencies

  • Moving from one to several CCPs – necessary changes :

- Technical infrastructure & IT changes

- Routing changes

- Operational changes

  • Different interpretation of A&I Guidelines

- Cherry picking clause (Art. 57)

- Diverging approaches towards prioritisation of requests

Public sector related dependencies

  • Possible need for CCPs to obtain a banking licence
  • Eurosystem policy statement on CCP consolidation
  • Lack of progress to tackle the removal of Giovannini barriers (Tax etc.)

Hybrid of public and private sector dependencies

  • Variety of national, legal and regulatory requirements

Exchange rules may require a local CSD-status

  • Selfregulation in a non-harmonised Europe creates a temporary unlevel playing field
  • Inter-CCP risk management principles to be agreed

The Code - Unbundling and Accounting Separation

  • These measures are designed:
    • To make transparent the relation between revenues and costs of different services in order to facilitate competition,
    • To make transparent potential cross-subsidies between the different services, and
    • To provide users with choice regarding the services available to purchase
  • The Code foresees unbundling and accounting separation between trading, clearing and settlement, and
  • Within the settlement layer, unbundling and accounting separation between:
    • Account provision, establishing securities in book entry form, and asset servicing;
    • Clearing and settlement (including verification);
    • Credit provision;
    • Securities lending and borrowing; and
    • Collateral management

CSD Services


Account Prov.

Asset Services

Clearing & Settlement


& Lending







Overview: service Unbundling & Accounting Separation

  • Unbundling the following services from each other:







  • Customer can purchase an unbundled service without having to purchase another
  • Special price offers for several unbundled services possible; special price has to meet price transparency requirements of CoC

Affects primarily ECSDA members

  • Disclose non-consolidated accounts for unbundled services to National Regulator
  • Apply IFRS or local standard, if IFRS not mandatory

Affects all associations: FESE, EACH and ECSDA members


Accounting Separation





National Regulator

National Regulator

National Regulator

National Regulator

  • Process

Disclosure of individual data

Format & completeness check of data delivery;no disclosure of individual data


Delivery of aggregated overview on completeness checks



The Code – Monitoring compliance

  • The European Commission has established a Monitoring

Group (MoG) which has met four times (January, April, July and October)

  • A two-steps process has been proposed by the European Commission:

1.A self-assessment report by the Organisations, which

will be provided to the National Regulator

2. An assurance-report by the External Auditors assessing the self-assessment

report, which will also be provided to the National Regulator


Maintenance / Facilitation of the Code of Conduct for Cash Equities

  • Background
  • Issue description
  • Proposed solution
  • CoC is a self-regulatory approach and represents a self-commitment of organizations in the stock exchange, clearing, settlement and safekeeping layers of the financial value chain.
  • The trade associations FESE, EACH and ECSDA are currently representing the organizations who have signed the CoC vis-à-vis the EU-Commission and other security industry associations.
  • New entrants are accessing the European trade / post trade landscape.
  • Such organizations are not already members of FESE / EACH or ECSDA.
  • Single point of contact per layer to facilitate the requests of additional CoC-signatories in the future.
  • Proposal to delegate the ‘maintenance / facilitation’ of the CoC to a new Committee, the “Coordination Committee” being composed by the Chair of the 3 Associations FESE/EACH/ECSDA*. Attendance should be limited to Associations and not to individual organizations.
  • The „Coordination Committee“ shall be open to other associations whose members have signed the Code.

* Known as ‘Pan-association call’


Extending the Code to other Asset Classes

  • The following generic questions have to be clarified upfront and serve as prerequisite of any discussion about other asset classes:
  • Is there a “market failure/deficit” to be addressed for : a) fixed income instruments? b) derivatives?
  • If there is a market failure what would be the adequate tool of a regulatory action for : a) fixed income instruments? b) derivatives?
  • If a self-regulatory approach is the adequate instrument to address market failure for derivatives/fixed income markets, which are the additional market players who should be involved?
  • Do you think that market infrastructures should, as a priority, focus on the full implementation of the existing Code of Conduct for cash equities?


  • What’s new in the life of ECSDA
  • The Code of Conduct
  • Target2 Securities
  • The Giovannini barriers
  • Update of the ECSDA cross-border model
  • Issuer services
  • Regulation of ESCB / CESR
  • Conclusion

ECB definition

  • T2S will be a single IT platform enabling settlement of securities in central bank money over the euro area
  • CSDs would delocalise their securities accounts to T2S, which would perform the processing of their settlement instructions on these accounts
  • CSDs would keep their customer base and continue to perform non-settlement related functions (issuance, corporate actions, custody …)

Status so far

  • ECB have released URD for consultation
    • “User Requirements Document”
    • ~800 pages long!
    • Responses due by 2 April
  • NUGs set up
    • “National User Groups”
  • Post 2 April
    • ECB to analyse responses
    • ECB Governing Council to decide in June?
      • Very tight deadlines

Key issues - General

  • Impact on market structure
    • Cross-CSD settlement
    • CSDs to move up value chain
  • Direct connectivity
    • Who does it benefit?
    • How does it deliver cost savings?
  • Corporate action processing
    • How does adding intermediation help?
      • Not a problem for bearer securities?
    • Information, deadlines, processes, efficiency…
  • “Re-shaping” debate
    • To what extent can T2S deliver end-to-end cost savings?
    • How to integrate existing services?
    • How to develop new services?

FeasibilityCan CSDs decommission systems? (1)

  • ECSDA paper sent to ECB
    • Request that it be made an agenda item for the AG
  • Major feature of the T2S proposal is the proposition that 13 settlement systems can be decommissioned and replaced by one, generating big cost savings
  • CSDs’ ability to decommission systems is not a matter of policy preference; it is:
    • Dictated by functional, operational and legal considerations
    • Strongly influenced by service level considerations
  • If CSDs cannot decommission systems, the costs of T2S would come on top of existing industry costs

FeasibilityCan CSDs decommission systems? (2)

  • T2S proposal envisages T2S providing end-of-day securities balances to CSDs (e.g. for corporate action processing)
    • Conclusion: CSDs cannot decommission account structures architecture/databases
  • T2S proposal envisages T2S databases only holding data required for settlement purposes
    • Conclusion: CSDs must maintain other databases with full data
  • T2S proposal envisages input & matching taking place in CSDs
    • Conclusion: CSDs cannot decommission lifecycle management systems
  • T2S will cover euro central bank money settlement only:
    • Conclusion: multicurrency CSDs and/or CSDs settling in commercial bank money cannot decommission any systems at all

Legal issues and governance

  • Key legal issues to be addressed
    • How is governing law established?
    • How is settlement finality established?
    • What will be the liability framework?
    • What will be the contractual arrangements (eg changes management)?
  • Governance
    • Respective roles of CSDs and users


  • What’s new in the life of ECSDA
  • The Code of Conduct
  • Target2 Securities
  • The Giovannini barriers
  • Update of the ECSDA cross-border model
  • Issuer services
  • Regulation of ESCB / CESR
  • Conclusion

The Giovannini Report: barriers

to a single European Market

  • January 2001:

The Giovannini Group released a first Report on Clearing and Settlement system in Europe, identifying 15 barriers to the implementation of a single, efficient European Market

  • April 2003:

The Giovannini Group released a second Report on Clearing and Settlement system in Europe, identifying the necessary actions to be taken for the removal of the 15 barriersmentioned in the first report

  • Conclusion:

The removal of the Barriers should be conducted by all the associations representing the Securities Industry in Europe, in cooperation with the Authorities involved, through the draft of technical standards, specific agreements, rules and regulations.


The role of ECSDA in the removal of the Barriers identified by the

second Giovannini Report(1)

The Giovannini Group gave the ECSDA a primary position in the process of the removal of the Barriers

Particularly, for the removal of Barriers concerning operating hours and intraday settlement finality, the Report states:

“Operating hours and settlement deadlines should be harmonised, using TARGET hours as the benchmark. ECSDA should take the lead in this initiative, in close cooperation with the ESCB. This barrier should be removed within a period of two years from the initiation of this project” (Barrier 7)

“ Intra-day settlement finality in all links between settlement systems within the EU should be guaranteed. ECSDA should coordinate necessary measures. These measures should be drawn up in close consultation with the ESCB/CESR joint working group. This barrier should be removed within a period of three months of removing Barriers 7 an 1” (Barriers 4)


ECSDA role in the removal of the Barriers identified by the second Giovannini Report(2):

For the removal of the Barrier 3 (Corporate action harmonisation), the Giovannini Group gave a mandate to ECSDA together with the credit sector’s associations.

“National Rules relating to corporate actions processing should be harmonised.

The local agent banks acting through the European Credit Sector Associations and together with ECSDA should coordinate private-sector proposals. National governments should co-ordinate their response via the relevant EU Council. This barrier should be removed within three months of removing Barriers 7 and 1”

ECSDA appointed the WG5 for the draft of market standards for the harmonisation of cross border settlement (4&7) and corporate actions procedures(3).


Barriers 4 & 7 – opening days, timetable and intra day settlement

finality : what has been done so far

  • April 2004:

The WG 5 published “the ECSDA response to the Giovannini Report”, a first set of 10 market standards for the harmonisation of opening days, timetable and intra day settlement finality for cross border transaction

  • April 2005 and April 2006: 2 update reports were released
  • Identify obstacles and barriers to the implementation of existing ECSDA standards (1-10);
  • Identify the effective market needs to overcome barriers to DVP cross border;
  • Monitor the effective implementation of existing ECSDA standards
  • ECSDA strengthened its cooperation with the European Primary Dealers Association (EPDA) in order to:

Barrier 3 – corporate action harmonisation: what has been done so far

June 2005: WG5 published “The ECSDA’s response to the Giovannini Report, Barrier 3, Corporate Action - Part 1 Mandatory Distributions”, a

First set of 16 market standards for the harmonisation of dividend payment procedures.

July 2006: “The ECSDA’s response to the Giovannini Report, Barrier 3, Corporate Action - Part 2 Claims” was published by WG5, with a second set of market standards for the harmonisation of market claim procedures.

In accordance with the mandate to speed up the harmonisation process, WG5 intensified talks and discussions with all the associations involved for the removal of Barriers 3: ESF/FBE/ECSA/EALIC.

The output of this joint work is the setting of 45 Market Standards on Mandatory Distribution enforced by all the associations.


Barrier 3 – corporate actions harmonisation: next steps

A Joint Corporate Actions Steering Group has been set up upon decision of ECSDA/EALIC/EBF/ESF ECSA in order to monitor and speed up the corporate action harmonisation process.

It was agreed by all members of the Steering Group to create a Corporate Actions Joint Working Group (CAJWG) for the analysis of the remaining Corporate Events: distribution with options, reorganisations, market claims (standards already drafted by ECSDA WG5 and to be agreed with all the association involved at CAJWG level).

  • Meetings were held in Brussels, London, Paris and Milan
  • Important steps forwards were taken as far as distribution with options and reorganisations are concerned
  • Other meetings are planned in order to finalyse the work on all the voluntaryand mandatory corporate events

The final work will be a complete set of Market standards for the harmonisation of the entire corporate actions process.


Giovannini Barrier 1 - Background

SWIFT received the mandate from the European Commission to work on the elimination of Giovannini Barrier 1:

“National differences in the information technology and interfaces used by clearing and settlement providers should be eliminated via an EU-wide protocol. SWIFT should ensure the definition of this protocol through the Securities Market Practice Group (SMPG). Once defined, the Protocol should be immediately adopted by the European System of Central Banks (ESCB) in respect of its operations. This barrier should be removed within two years from the initiation of this project.”

Currently not all CSDs do offer a standardised gateway to their systems and require proprietary protocols to access their core settlement and corporate action systems.

SWIFT did consult with all participants in the European space to discover why this is the case


Consultations leed to requirements

  • SWIFT discovered that local formats are existing for different reasons:

1. Requirements from local customers in the past

2. Additional / special services from CSDs

3. Competition was not accepted by local participants which in most cases have been also the owners

  • Reconciliation of internal proprietary messages between CSD and customers versus ISO15022 messages was done with the requirement to change or add ISO15022 messages

Giovannini Barrier 1 - Current / Next steps

  • Workshops have been taken place for all different areas of activity
  • Gaps have been identified, classified or declined for a enhancement process
  • Presentation on the industry consultation on Giovannini Barrier 1 planned for next WG 6 meeting in March
  • Deadline for elimination of the GB1 is set for early 2011


  • What’s new in the life of ECSDA
  • The Code of Conduct
  • Target2 Securities
  • The Giovannini barriers
  • Update of the ECSDA cross-border model
  • Issuer services
  • Regulation of ESCB / CESR
  • Conclusion


  • Numerous DvP links between CSDs exist in Europe
  • Very often for settlement of transactions that are submitted directly from an exchange and/or CCP
  • TARGET2 replaces TARGET, offering new possibilities for cross-border DvP settlement in central bank money


  • Analyse existing links
  • Identify common features
  • Develop generic models that reflect the existing situation
  • Develop solutions for future settlement of the cash leg via T2
  • Ask WG6 to develop harmonised messages for cross-border settlement between CSDs (in cooperation with SMPG/SWIFT)


  • Report of nearly 90 pages
  • Emphasis on solutions where instructions are submitted from exchanges/CCPs and processed STP in DvP links across CSDs
  • Instructions input by participants as a special case of the above, requiring matching processes in the CSDs
  • Cash leg in commercial bank money or central bank money for any of the parties to the settlement

Relation to MiFID and Code of Conduct

  • The links offer what MiFID requests in article 34(2) (“participants should have the right to designate the system in which they settle their trades”)
  • The links serve as model for the links mentioned in the Access and Interoperability Guideline of the Code of Conduct
  • They are in the Code called standard unilateral access or customised unilateral access
  • WG6 develops standards for the customised access

Matching issues

  • For the matching processes in the CSDs, ECSDA and ESF developed harmonised standards in 2006
  • Implementation started in 2007
  • Implementation should be complete by 2009
  • The standards actually include matching and life-cycle management processes
  • Key element is a hold/release mechanism that allows users to control at any time whether an instruction is submitted to settlement (“released”) or not (“hold”)

Matching and T2S

  • There is currently a debate with T2S on whether matching should take place in T2S or in the CSDs
  • ECSDA is of the opinion that matching should be unbundled from settlement
  • T2S should be a platform for settlement only
  • CSDs can match instructions outside T2S following their own standards


  • What’s new in the life of ECSDA
  • The Code of Conduct
  • Target2 Securities
  • The Giovannini barriers
  • Update of the ECSDA cross-border model
  • Issuer services
  • Regulation of ESCB / CESR
  • Conclusion


  • A key CSD service is to hold securities issuance accounts on behalf of issuers and to enable and administer securities transactions to be processed by book-entry. These procedures are designed to protect the integrity of securities issuances as well as to facilitate safe and efficient securities services distribution. Issuance and holding procedures may vary from country to country depending on issuer preference, market practice and regulation.
  • The current issuer service level varies considerably between European CSDs. In some markets CSDs offer extensive services to issuers while in other markets CSDs currently offer a rather limited service.
  • In order to address and explain these differences ECSDA held an internal Special Session on Issuer Services in 2005. As follow-up ECSDA decided to gather further information on the current issuer services level among its members. This study was completed in 2007.
  • The findings in the ECSDA study will be presented at a conference on 3 April 2008.

Study methodology

  • 4 categories of issuer services:

Category 1: Corporate Actions services

Category 2: Information services

Category 3: Annual General Meeting services

Category 4: Other issuer services

  • Upstream (Issuer) versus Downstream (Investor) services
  • 4 questions
      • Do you -or do you consider to- provide the service ?
      • How is your current market situation ?

- Mandatory or voluntary service

      • Who is your customer ?

- The issuer/investor itself (direct) or an intermediary (wholesale)

      • How do you reach your customer ?

- By web, a proprietary system or another way (eg. paper/fax)


Main findings 1 Corporate Actions services

“Corporate actions services” include any event initiated by an issuer which impacts holders of securities.

Customer relationship

  • A substantial number of CSDs provide upstream Corporate Actions services directly to the issuer
  • Most CSDs provide downstream services through intermediaries

Market situation and service level

  • Many mandatory corporate action services (e.g. in 51% of CSDs payment services are mandatory)
  • The level of involvement in tax related services depends on CSD account structure & legal framework
  • Room for improvement of issuer interfaces (only 20% of the CSDs provides a web interface for issuers)

Main findings 2 Information services

  • “Information services” include registrar services, shareholder communication, insider reporting , mutual funds taxation and statistics (ownership, turnover and holdings)
  • Customer relationship
  • Most CSDs provide upstream information services directly to issuers.
  • Downstream information services are normally provided partly to the final investor, partly via intermediaries
  • Market situation and service level
  • Most CSDs provide registrar services, many as mandatory services. A lower score on involvement in ownership, turnover and holding statistics may indicate potential for further CSD services.
  • Most CSDs offer shareholder communication services and normally in a competitive environment
  • Only a few CSDs offer insider reporting and mutual funds taxation services.
  • Surprisingly few CSDs offer statistical services downstream
  • Room for improvement of issuer interfaces (web interfaces and SWIFT formats are rare services).

Main findings 3 Annual General Meeting services

“Annual General Meeting” (AGM) services include announcement, administration and proxy voting services

Customer relationship

  • Most CSDs provide AGM announcement services to issuers and many others are considering this as an opportunity
  • Upstream AGM announcement and administration services are mainly offered directly to the issuer, and proxy voting services mainly to an intermediary
  • Downstream AGM services are mainly offered to an intermediary

Market situation and service level

  • Most AGM services are offered in a competitive environment
  • Some CSDs are fully or partly involved with proxy voting and AGM administration services to issuers and others are considering this as an opportunity
  • Currently, only 3 CSDs offer AGM services via SWIFT format (but the SWIFT 20022 message may change this)

Main findings 4 Other issuer services

“Other issuer services” include national numbering agency (NNA) and

EC Transparency Directive Official Appointed Mechanism (OAM) services

Customer relationship

  • CSDs providing NNA and OAM services normally serve the issuer directly
  • Downstream services are normally offered to intermediaries

Market situation and service level

  • 69% of CSDs are responsible for the numbering of securities in their domestic market. In the other markets NNA services are provided by a stock exchange, a central bank or a private data vendor
  • 17% of CSDs currently provide OAM service. Another 17% are considering OAM as an opportunity
  • The downstream communication channels for NNA and OAM are 100% electronically whereas the upstream ones may still involve correspondence for NNA

Main conclusion 1Potential for further CSD issuer services

66 % of ECSDA CSDs have a direct issuer relationship


Main conclusion 2The potential level of issuer services seems to depend on its issuer relation as well as its account structure



  • What’s new in the life of ECSDA
  • The Code of Conduct
  • Target2 Securities
  • The Giovannini barriers
  • Update of the ECSDA cross-border model
  • Issuer services
  • Regulation of ESCB / CESR
  • Conclusion

Regulation of ESCB/CESR

  • The European System of Central Banks (ESCB) and the Committee of European Securities Regulators (CESR) attempting to define standards aimed at increasing the safety, soundness and efficiency of securities clearing and settlement activities in EU
  • Strengthens the CPSS/IOSCO Recommendations for Securities Settlement Systems (issued in 2001)
  • (Systemic) risk minimisation is the key aim
  • Tried to deliver “functional regulation”
    • functional regulation requires that the standards should be applied to functions NOT institutions
    • important providers of settlement services, i.e. CSDs, ICSDs and agent banks
  • But, standards “stalled” for over three years
  • Now being revived …


  • What’s new in the life of ECSDA
  • The Code of Conduct
  • Target2 Securities
  • The Giovannini barriers
  • Update of the ECSDA cross-border model
  • Issuer services
  • Regulation of ESCB / CESR
  • Conclusion

The only certainty for European CSDs is their… uncertain future

  • Will the Code of Conduct be a success? If yes, what will be its consequences? If not, should we be prepared to enter into a couple

of years of negotiation on a Directive?

  • Will Target2 Securities be launched? If yes, and even if it would be expected to become operational in 2013, what would be its consequences in terms of CSDs’ strategic developments (investments, alliances)?
  • Would a combination of the Code (if successful) and of T2S foster competition amongst CSDs in Europe? Is it, eg, a realistic scenario for CSDs to move up the value chain (i.e. to become custodians)? Will the already observed blurring of borders between CSDs and custodians (internalisation) spread out?
  • Are issuers services a strategic development for CSDs in a European context?
  • ………..…