Gertrude Tumpel-Gugerell: High-level panel: Improving the efficiency
and integration of post-trading arrangements in Europe
Speech by Ms Gertrude Tumpel-Gugerell, Member of the Executive Board 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.
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Ladies and gentlemen,
I am delighted to open the high level panel on improving the efficiency and integration of
post-trading arrangements in Europe and to share with you our visions for a more integrated
financial post trading market.
Queen Victoria once said: "Change? Why do we need change? [Things are quite bad
enough as they are]". Well, a few years ago the post trading community was facing the
question whether to follow Queen Victoria and not to change the post trading environment.
So I am delighted when I look at today's post trading environment to see a dynamic change
environment with a lot of activity and initiative. An important question - that we will address in
this panel - is how we can further shape and contribute to the future post trading
environment.
As members of the panel, we have the pleasure of welcoming Mr Eddy Wymeersch,
Chairman of the European Committee of Securities Regulators (CESR), Ms Pervenche
Berès, Member of the European Parliament and Chairperson of the Committee on Economic
and Monetary affairs of the European Parliament and Mr Jeffrey Tessler, Chief Executive
Officer of Clearstream International.
I am especially happy to open this panel because the post-trading segment of the financial
market plays a particularly important role in ensuring the safety and efficiency of allocating
and attracting funds within a globalised financial market. To put this into perspective, the
securities trading volumes for the EU stood at approximately €150 trillion in 2006, as
compared with €196 trillion in the United States and €72 trillion in Japan, and keeping in
mind at the same time that the settlement volumes could be as much as three times as high.
In the light of these significant and increasing volumes, it is evident that today's challenges
are best tackled by involving market participants in the definition of concerted efforts to foster
innovative and operative actions to enhance the safeguarding and integration of the currently
too fragmented European post-trading market.
The Eurosystem takes its responsibility and is accountable for acting as a market operator,
facilitator and catalyst for new initiatives as part of the common European objective of
creating a truly transparent and integrated European financial market in line with the single
market agenda.
The Eurosystem will continue to play an active role in the payment industry by offering
several types of service and infrastructure to the financial market. It has proven that it is
capable of managing large-scale facilities and now provides a borderless core infrastructure
for real-time settlement in central bank money with TARGET 2. Furthermore, a medium-term
project for the next generation of collateral management has been launched under the name
of "Collateral Central Bank Management" (CCBM2), the objective of which is to consolidate
and enhance the efficiency of the Eurosystem's collateral management systems to the
benefit of eligible counterparties. Currently, there is a public consultation on the draft CCBM2
user requirements under way, in which market participants have been invited to provide their
comments by 5 May 2008.
Let me also elaborate on the new TARGET2 Securities (T2S) project. The T2S project is the
Eurosystem's proposal for making cross-border securities settlement transactions in central
bank money as secure, efficient and cheap as domestic settlement transactions are today.
T2S will build on and benefit from the newly released TARGET2 system thereby combining
cash and securities settlements - in real time - within a single European infrastructure. This
will be Europe's single "pipeline" settlement system, a system similar to those that have
already been implemented by other economic areas. I firmly believe that T2S will contribute
to speeding up market integration and fostering the necessary competition in Europe, to the
benefit of financial participants and the citizens of Europe.
The T2S project will act as a driver to remove even more barriers of the kind already
identified by the Giovannini Group, as well as help users to identify the irreducible costs of
unresolved barriers in the new efficient borderless settlement environment. This project will
also advance the European harmonisation process, creating opportunities for further cost
savings and allowing market participants to easily select and choose post-trade partners
irrespective of their location within the single market. The impact of T2S on harmonisation is
already being felt, building on the valuable work carried out by the CSDs. The harmonisation
process goes far beyond pure settlement activities and will increase the pressure for swift
action to harmonise practices, especially in relation to corporate activities, taxes, laws and
regulations.
The dynamic and second-round effects of T2S will pass through the market to increase
trading activity, reduce trading spreads, increase competition and lower service prices, thus
improving welfare in general. With T2S, the concept of cross-border settlements in Europe
will disappear; instead, there will just be a domestic securities settlement for Europe.
The Governing Council decided to maintain the current governance structure arrangements
for the forthcoming specification phase which is scheduled to be completed by the end of
2009. Work is under way to present the governance structures for the subsequent
implementation and operational phases. Replies from market participants are coming-in
contributing to the assessment of costs-benefits and economical impact of T2S on the
industry.
I can assure you that we will carefully weigh all the economic factors, the legal aspects and
the risks involved. We rely on the dialog with you to bring all the arguments on the table.
Preliminary results provide us with the confidence that the economical aspects of the project
will bring savings to the industry as a whole over the medium term. Further results are
expected still within April. The Governing Council of the ECB will take the final decision on
building the T2S project during the summer of 2008.
The ECB is in full agreement with the Commission regarding the Code of Conduct, in
particular in the core principles of establishing the freedom of choice and competition in
trading, clearing, and settlement on the basis of price transparency, access and
interoperability and the unbundling of services, bringing transparency to the market. The
ECB welcomes initiatives that contribute to creating a truly integrated and efficient European
financial market in line with the Lisbon agenda. I can assure you that the ECB listens
carefully to the views of the market, which is another reason for hosting this conference: We
want to stay in close contact with post-trading partners. I therefore look forward to discussing
with you - as conscientious decision-makers of the European securities industry - ideas for
accelerating the fulfilment of the Lisbon agenda in order to obtain a single, transparent and
efficient post-trading market in Europe.