EUROPE – The European Commission has proposed a directive on securities clearing and settlement, aimed at creating a level playing field in Europe.

The proposed framework directive would “increase competition and efficiency and, as a result, to drive down costs”. It said: “The Commission considers that in order to increase efficiency, it is necessary to liberalise and to integrate existing securities clearing and settlement systems.”

Its “overarching objective” was to make sure that EU securities clearing and settlement systems are “efficient, safe and ensure a level playing field among the different market players”.

Internal market commissioner Frits Bolkestein said “there will be no real single securities market in the EU unless we can make cross-border clearing and settlement as efficient, safe and cost-effective as at national level”.

He called on stakeholders, regulators, supervisors and EU institutions to “do their bit, as a team”.

The Fair & Clear body of European custodian banks welcomed the moves, and said: “The directive will need to be based on clearly-defined, carefully-determined and appropriate functions that will achieve the desired legislative objectives for a safe and efficient regulatory framework.”

But it highlighted “serious concerns” that regulating infrastructure and intermediary functions in the same way, such as requirement for similar governance practices, would “lead to unnecessary costs for the market”.

The Commission’s proposals build on other elements of the Financial Services Action Plan – such as access to all EU markets for all EU operators, mutual recognition of rules and full transparency.

They draw on two reports by the Giovannini group and follow consultations with the markets, regulators and other interested parties.

The Commission said: “Such a directive would introduce comprehensive rights of access for clearing and settlement providers to all EU markets.” It added the measure would mean choice for investment firms, banks, central counterparties, central securities depositaries and markets.

The directive would also mean mutual recognition of clearing and settlement systems across the EU. It would also stipulate the appropriate governance arrangements.

The Commission also called for the setting up an advisory and monitoring group composed of “high-level representatives” of the various private and public bodies involved.

The Commission said any future directive should be based upon functional definitions. It has put forward a consultative document on the topic and is seeking responses by July 30.

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