Securities clearing and settlement
Securities clearing and settlement
Context
The EU securities framework was completed following the 2008 financial crisis with a set of legislations aiming to improve the safety and efficiency of capital markets, covering clearing and settlement activities (EMIR, CSDR, CCP recovery and resolution framework) and securities financing transactions (SFTR). Rules have also been implemented at the international level in these areas notably with the IOSCO PFMIs. Some issues are however still pending.
How to mitigate the potential risks posed by UK-based CCPs to the EU is a long-standing issue in the post-Brexit context with around 90% of cleared euro swaps still handled in the UK. A comprehensive assessment conducted by ESMA identified 3 UK-based clearing services as being of substantial systemic importance for the EU. However at this stage the cost of derecognising these services has been considered as superior to the possible financial stability benefit and the temporary equivalence decision concerning UK-based CCPs was extended for 3 years until June 2025.
Following a consultation led on how to improve the competitiveness of EU CCPs and work conducted by the ECB, the ESAs and the ESRB, the Commission proposed a set of actions for strengthening EU clearing in December 2022. This package includes measures for accelerating the procedures for approving new clearing activities and simplifying equivalence assessments in low risk cases, the requirement for EU market participants to clear a portion of substantially systemic products through active accounts at EU CCPs and measures to enhance the cross-border supervision of EU CCPs.
Following the pressures on liquidity that some energy companies experienced in 2022 because of higher margin calls linked to rising energy prices, the Commission moreover proposed increasing the transparency on margin models and strengthening requirements for non-financial firms participating in CCPs. In order to increase clearing capacity in the EU, the Commission also encourages public entities and authorities in the EU, to centrally clear their positions at EU CCPs.
In the settlement space a proposed review of the CSD Regulation (CSDR) published in March 2022 has been adopted. Its objective is to ensure more proportionate and effective rules in order to reduce compliance costs and regulatory burdens for CSDs, facilitate their ability to offer a broader range of services cross-border, and also improve their cross-border supervision.
A further evolution is the implementation of new technologies such as DLT, cloud computing and AI, which is gathering pace and has the potential to significantly reshape post-trading activities with further efficiency and integration. Many issues however remain in terms of scalability and interoperability of DLT systems in particular that the recently proposed DLT pilot regime aims to help address. Finally, although significant efforts have been made in terms of technical harmonisation with the implementation of CSDR and TARGET2-Securities, legal and fiscal rules remain fragmented. A targeted harmonisation of the corporate insolvency framework has been proposed in December 2022 in the context of the latest CMU action plan and further proposals are expected concerning withholding.
Eurofi documents
Extracted from the main Eurofi publications (Regulatory Updates, Views Magazines and Conference Summaries)
Eurofi policy note
Strengthening EU clearing: key issues and way forward proposed - April 2023
Panel discussion summaries
Impacts of digitalisation on trading and post-trading - Stockholm High Level Seminar - April 2023
Strengthening EU clearing - Stockholm High Level Seminar - April 2023
Strengthening EU clearing: key issues and priorities - Prague Financial Forum - September 2022
Leveraging the benefits of DLT in securities markets - Paris High Level Seminar - February 2022
Clearing: remaining challenges and way forward - Ljubljana Financial Forum - September 2021
Securities and derivatives clearing: remaining challenges - Lisbon Virtual Seminar - April 2021
EU securities post-trading: priorities ahead - Lisbon Virtual Seminar - April 2021
Eurofi Views Magazine chapters
Impacts of digitalisation on trading and post-trading - April 2023
Carlo Comporti - Commissione Nazionale per le Società e la Borsa (CONSOB) | Claudine Hurman - Banque de France | Julian Reischle - Deutsche Bundesbank | Roland Chai - Nasdaq | Jennifer Peve - The Depository Trust & Clearing Corporation (DTCC) | Arnaud Misset - CACEIS | Lawrence Low - Standard Chartered
Strengthening EU clearing - April 2023
Klaus Löber - European Securities and Markets Authority (ESMA) | John Berringan - European Commission | Claudine Hurman - Banque de France | Daniel Maguire - LCH | Erik Tim Müller - Eurex Clearing | Haroun Boucheta - BNP Paribas | Giuseppe Grande - Banca d’Italia | Suyash Paliwal - US Commodity Futures Trading Commission (U.S. CFTC)
Competitiveness and resilience of EU infrastructures - September 2022
Denis Beau - Banque de France | Ulrich Bindseil - European Central Bank | Piero Cipollone - Banca d’Italia | Julian Reischle - Deutsche Bundesbank | Ilse Peeters - Euroclear S.A | Daniela Peterhoff - Nasdaq | Haroun Boucheta - BNP Paribas Securities Services
Strengthening EU clearing - September 2022
Klaus Löber - European Securities and Markets Authority | Pamela Dejmek-Hack - European Commission | Julian Reischle - Deutsche Bundesbank | Daniel Maguire - London Stock Exchange Group | Erik Tim Müller - Eurex Clearing | Christophe Delafontaine - BNP Paribas | José Manuel Ortiz - SIX
Clearing policy priorities - February 2022
Klaus Löber - European Securities and Markets Authority | John Berrigan - European Commission | Segal-Knowles - Bank of England | Julian Reischle - Deutsche Bundesbank | Claudine Hurman - Banque de France | Isabelle Girolami - LCH Limited | Erik Tim Müller - Eurex Clearing AG | Haroun Boucheta - BNP Paribas Securities Services
DLT in securities markets - February 2022
Natasha Cazenave - European Securities and Markets Authority | Birgit Puck - Austrian Financial Market Authority | Jérôme Reboul - Autorité des Marchés Financiers | Sarah Pritchard - Financial Conduct Authority | Jennifer Peve - The Depository Trust & Clearing Corporation | Isabelle Delorme - Euroclear S.A. | Daniel Kapffer - DekaBank Deutsche Girozentrale
Clearing: remaining challenges and way forward - September 2021
Klaus Löber - European Securities and Markets Authority | Paulina Dejmek Hack - European Commission | Nathalie Aufauvre - Banque de France | Daniel Maguire - LCH Group, London Stock Exchange Group | Erik Tim Müller - Eurex Frankfurt AG
Post-trading priorities - September 2021
Denis Beau - Banque de France | Fiona Van Echelpoel - European Central Bank | Dirk Schrade - Deutsche Bundesbank | Barbara Lupi - Banca d’Italia | James Cunningham - BNY Mellon | Ilse Peeters - Euroclear S.A.
New technologies in securities markets - September 2021
Jochen Metzger - Deutsche Bundesbank | Birgit Puck - Austrian Financial Market Authority | Robert Ophèle - Autorité des Marchés Financiers | Sven Werner - State Street Bank and Trust | Emmanuel Aidoo - Credit Suisse | Berta Ares - BME Inntech | Janin Stéphane - AXA Investment Managers
Securities and derivatives clearing - April 2021
Klaus Löber - European Securities and Markets Authority | Jochen Metzger - Deutsche Bundesbank | Nathalie Aufauvre - Banque de France | Daniel Maguire - LCH Group and LSEG | Haroun Boucheta - BNP Paribas Securities Services
Securities post-trading - April 2021
Jochen Metzger - Deutsche Bundesbank | Niels Brab - Deutsche Börse Group | Guillaume Eliet - Euroclear S.A. | Swen Werner - State Street Bank and Trust | Alex Dockx - JPMorgan | Francisco Béjar - Iberclear | Hélder Rosalino - Banco de Portugal