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31 december 2006

Post-market activities: the FBF asks for a directive

To complete the integration of the European financial sector, post-market activities will have to be standardised.


With this goal in mind, Commissioner McCreevy said on July 11, 2006, that he was in favour of a process of self-regulation, in order to make post-market activities in Europe more efficient and more competitive. He asked post-market infrastructures to draw up a code of conduct to promote real competition in this area and to reduce the costs of processing cross-border transactions.

The code of conduct was signed on November 7, 2006, by European federations representing post-market infrastructures (FESE for securities markets, ECSDA for central depositaries, and EACH for clearing institutions).

The code revolves around three priority areas :

  • price transparency;
  • access to infrastructures and their interoperability;
  • the separation of services from back offices.

Signatories will phase in the provisions of the code, which must be fully implemented by January 1, 2008.

The FBF’s stance

As users of post-market infrastructures, French banks were consulted during the drafting of the code of conduct. When the draft was presented, the FBF expressed its satisfaction that the broad principles that it values, in particular price transparency and separation of services (network operation on the one hand and competitive activities on the other hand), had been made a focus of the code of conduct.

However, during several meetings in 2006, the FBF reminded Commissioner McCreevy of its preference for a directive that would provide a regulatory framework for the post-market sector, which is a quasi-monopoly, just as network activities (transport, energy and telecoms) come under specific European regulations.

The Eurosystem project

In July 2006, Eurosystem began consultations on a single platform for unwinding operations on euro-denominated securities called Target 2 Securities. French banks are very much in favour of this idea. In its September 2006 reply to the ECB questionnaire, the FBF said that a single platform such as this would, among other things :

  • contribute to the integration, security and efficiency of European settlement-delivery systems;
  • reduce cross-border settlement-delivery costs for euro-denominated securities;

reduce possible distortions in competition that could exist between post-market infrastructures and banks in some activities.

A feasibility study has been launched, whose results are due to be presented in late February 2007 to the Board of Governors of the European Central Bank.

Post-market activities are operations that, after trading on a financial market, ensure proper completion of transactions and ensure delivery and payment of securities.

They include two stages: clearing in order to determine the net number of securities to deliver, and settlement-delivery, i.e. the delivery of securities to the buyer and the payment of the corresponding sum.

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