Jean-Claude Trichet: Opening speech at the conference on "The safety
and efficiency of post-trading arrangements in Europe"
Opening speech by Mr Jean-Claude Trichet, President of the European Central Bank, at the
Joint ECB/European Commission conference "The safety and efficiency of post-trading
arrangements in Europe", Frankfurt am Main, 21-22 April 2008.
* * *
Ladies and gentlemen,
I am delighted to welcoming you to Frankfurt and open the next one and a half day's
Conference on "The safety and efficiency of post-trading arrangements in Europe". This
conference is organised jointly by the ECB and the European Commission as part of our
continuous concerted initiatives to foster European financial integration in general and in the
post-trading environment in particular. This conference is distinctive in at least two ways.
Firstly, it brings the main European decision makers and opinion-formers from various
segments of the post-trading activity together, to foster the European debate in an open and
visionary way. Secondly, as the Conference is organised into distinguish sessions covering
all post-trading activity, we have a unique opportunity to draw up concrete proposals and
recommendations from each field of expertise. I look forward to learn from the discussions of
today's conference on how to enhance the safety and efficiency of the European post-trading
market.
I would like to emphasise the importance of the post-trading activities in Europe. Put into
global perspective, Europe is comparable to the United States in terms of its economic size,
but whereas firms in the United States operate in a single, large domestic post-trading
environment, in Europe, firms have to operate across many smaller, national markets and
bear the higher complexity and costs of connecting to all of these markets either directly or
via manifold intermediaries, implying additional unnecessary costs. As a result of this lack of
integration, Europe lags behind the United States.
For example, the cost gap1 is particularly large for cross-border transactions, with estimates
suggesting that the difference can be a multiple of two or even more.
This gap for Europe must be closed and clearly demonstrates that concrete actions are
needed to make Europe significantly more competitive and a more attractive place for
issuers and investors.
This objective is in line with the Lisbon agenda, which claims that not only must Europe do
better, it can do better. We aim to make Europe a highly efficient and secure place to issue
and trade securities. However, Europe lacks - for instance - a common post-trade
"autobahn" or "highway" system, whereas the United States created such a system almost
10 years ago. The aim of the European post-trading market must therefore be to create one
single market across Europe which is as secure, efficient and cheap as domestic markets
are today.
The Eurosystem takes the view that today's challenges are best tackled by involving market
participants in solving the current economic and financial gaps. The Eurosystem is acting as
a market catalyst and playing a unique facilitation role, bringing together market participants
to create a truly integrated European post-trading market. The Eurosystem achieved a great
success by providing - in the form of TARGET2 - borderless core infrastructures for real-
time settlement in central bank money. Further support for the single market will come from
the streamlining of collateral management systems through the CCBM2 (Collateral Central
Bank Management) project. In addition, the TARGET2-Security (T2S) project aims at
building on the TARGET2 system and brings securities transactions settlement with pure
cash settlements together across Europe. These Eurosystem initiatives joins other European
initiatives, such as the Code of Conduct and the Markets in Financial Instruments Directive
(MiFID), in helping to fulfil the objectives set out by the Lisbon agenda for the provision of
better services to issuers and investors. We firmly believe that these concerted initiatives will
speed up the long awaited market integration and foster competition thereby creating
opportunities for cost savings and allowing market participants to select and choose
posttrade partners irrespective of their location within the single market.
This also requires a clear roadmap for securing the "safety and soundness"2 of post-trading
systems from a European perspective and for the relevant authorities to define common
practices compatible with a single market, including the dismantling of current legal and fiscal
barriers, in particular, national differences in the legal treatment of securities and actions on
conflict-of-laws.
This is in conformity with the recommendations of the Giovannini group findings, which
examined the EU post-trading sector and identified 15 barriers to be removed in order to
ensure and efficient cross border clearing and settlements in the context of completing the
single market; One of which relates to the current restrictions on the location of securities
(barrier 9), which limits the issuers choice to place their securities with foreign depositories.
All these concerted initiatives will bring benefits for Europe. Commercial service-providers
will benefit from the level playing-field that common platforms, harmonised rules and reduced
complexity will bring. Issuers will benefit from lower capital costs. Investors will benefit from
better returns.
However, the benefits go beyond the European post-trading activity, as an efficient
posttrading market also contributes to the safeguarding of financial stability. Efficient and
integrated markets reinforce the shock-absorption capacity of the system, as they are more
liquid and offer better opportunities for financing and risk distribution. Similarly, in periods of
high market volatility, the efficency of processing, clearing and settlement and the timeliness
of reusing funds contributes to the stability and shock-absorption capacity of financial
markets.
Considering the value of securities trading volumes in the EU of approximately EUR 150
trillion in 2006, the importance and potential impact of the post-trading activity can not be
underestimated.
Therefore, in summary, the post-trading service providers and their users will benefit from the
overall economic efficiency within the pre and post-trading industry of an integrated financial
market.
Against this background, you have all been invited to this conference as decision markers
from various segments of the post-trading activity to foster the European debate with a view
to improving the safety and efficiency of the European post-trading sector. I welcome you to
take this opportunity to co-operate together and exchange visions and possible actions to
enhance the safety and efficiency of the European post-trading market, in line with the
Lisbon agenda and for the benefit of the 500 million citizens in the European Market.
I look forward to learn about today's discussions and I wish you a successful and out bringing
Conference. I would like to pass on the floor to the next speaker, Commissioner Charlie
McCreevy - responsible for "Internal Market and Services", to present us with the keynote
speech of the Conference.