Trends in European Clearing and Settlement Industry - The European Code of Conduct and Target2-Securities
Deutsche Börse Group
February 15, 2007
Despite many innovations and restructuring in the last years, the securities clearing and settlement industry in Europe is still said to be highly inefficient for cross-border transactions. This paper provides a fact based overview of the market, regulation, and recent developments that aim to improve the efficiency of clearing and settlement in Europe. The European code of conduct for clearing and settlement and TARGET2-Securities are identified as primary concerns in this industry. The code of conduct for clearing and settlement, initiated by the European Commission, intends to improve price transparency, interoperability, and service unbundling. The phased course of action of the code of conduct is presented. An analysis of the current implementation status of the code of conduct shows potentials for improvements. TARGET2-Securities, as technical platform for settlement of securities in Europe, provided by Eurosystem, could have a significant impact on the settlement of securities in Europe. The importance of the participation of all central securities depositories for the success of the platform is shown by a simulation. The different approaches for improving efficiency in cross-border clearing and settlement are compared with each other. TARGET2-Securities could create a monopolistic infrastructure for settlement which stands in contrast to the code of conduct.
Number of Pages in PDF File: 31
Keywords: Securities clearing and settlement, Central counterparty, TARGET2-Securities, European code of conduct for clearing and settlement
JEL Classification: D40, F36, G20, L22
Date posted: July 6, 2008 ; Last revised: September 4, 2008