COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 13.03.1998 
COM(1998) 151 final 
96/0126 (COD) 
OPINION OF THE COMMISSION 
pursuant to Article 189 b (2) (d) of the EC Treaty, 
on the European Parliament's amendments 
to the Council's common position regarding the 
proposal for a 
EUROPEAN PARLIAMENT AND COUNCIL DIRECTIVE 
ON SETTLEMENT FINALITY IN PAYMENT AND SECURITIES SETTLEMENT SYSTEMS 
AMENDING THE PROPOSAL OF THE COMMISSION 
pursuant to Article 189 a (2) of the EC Treaty 

1. BACKGROUND 
1. On 30 May 1996, the Commission adopted a proposal for a Directive on Settlement Finality and 
Collateral Security1. This text was forwarded to the Parliament, the Council, the Economic and 
Social Committee and the European Monetary Institute. 
2. The Council began to examine the proposal on 20 September 1996. 
3. The Economic and Social Committee unanimously adopted an opinion on the Commission 
proposal on 31 October 1996, in which it recommended that securities settlement systems be 
included in the scope of the proposal2. 
4. The European Monetary Institute delivered its opinion on 21 November 1996. It welcomed the 
proposal and stressed its crucial importance to the efficient and smooth functioning of payment 
systems; it also recommended that securities settlement systems should be included in the scope. 
5. The European Parliament welcomed this proposal and adopted its opinion on the Commission 
proposal during its plenary meeting of 9 April 19973. 
6. On 4 July 1997, the Commission adopted its amended proposal4 in the light of the consultation of 
the European Parliament, the Economic and Social Committee and the European Monetary 
Institute. 
7. On 13 October 1997, the Council adopted its common position5. 
8. On 29 January 1998, the European Parliament adopted 3 amendments in second reading. 
In accordance with Article 189b (2) (d) of the EC Treaty, the Commission has to deliver an opinion 
on these amendments. 
COM (96) 193 final, OJ N° C 207, 18.07.1996., p. 13. 
OJ N°C 56, 24.02.97., p. 1. 
OJN°C 132,28.04.97. 
Amended proposal for a European Parliament and Council Directive on settlement finality and collateral security (to 
be renamed 'On the limitation of systemic risk in payment and securities settlement systems'), COM/97/0345 final -
COD 96/0126, Official journal NO. C 259 , 26/08/1997 p. 6. 
OJ C 375, 10 December 1997, p. 34. 
2. POSITION TAKEN BY THE COMMISSION REPRESENTATIVE AT THE PLENARY SITTING 
The European Parliament proposed 3 amendments to the text of the common position of the 
Council. The Commission representative accepted all amendments. 
(The relevant amendments are numbered 4 to 6; earlier amendments 1 to 3 were withdrawn) 
3. COMMISSION OPINION ON THE AMENDMENTS VOTED BY THE EUROPEAN PARLIAMENT 
Amendment 4 
Amendment 4 proposes to delete Article 11 of the common position. Since the first paragraph of 
amendment 6 states in clearer terms what Article 11 aims at achieving, this amendment is 
acceptable to the Commission. 
Amendment 5 
Amendment 5 changes the second part of article 3 (1) of the common position. It underlines the 
exceptional nature of the cases in which transfer orders entered into the system after the opening 
of insolvency proceedings are valid. It also turns around the burden of proof: transfer orders 
entered after the opening of insolvency proceedings are only valid if the "system" can prove that it 
was unaware and should not have been aware of this opening. Finally, it specifies whose 
unawareness is relevant in order for a transfer order entered after the moment of opening of 
insolvency proceedings to be valid: transfer orders entered after that moment are only valid if the 
central counterparty, the clearinghouse or the settlement agent were unaware and should not have 
been aware of the opening of insolvency proceedings. 
Although the Commission is of the opinion that having to provide a negative proof (proof of 
unawareness) can raise difficulties, it nevertheless considers that this good faith clause is workable 
in practice, especially in view of the procedure for notifying insolvencies as defined in the 
Directive. 
Amendment 6 
• first paragraph 
The first paragraph of amendment 6 clarifies what Article 11 of the common position aimed at 
achieving. The Commission can therefore accept both amendment 4 (deletion of article 11) and 
amendment 6 (1). It should be noted that the fact that Member States can impose supervision of 
systems can of course in no way prejudice the powers of the European System of Central Banks as 
laid down in Article 22 of its statute. 
• second paragraph 
The second paragraph of amendment 6 aims essentially at allowing the final users of payment or 
securities settlement systems, namely the customer, to be informed of which system his bank or 
investment firms uses to transfer money or securities for his account, as well as of the main rules 
governing the functioning of these systems. This should allow the customer, and other parties with 
a legitimate interest, to be able to compare the services provided by different systems in terms of 
transfer time e.g. and to asses the degree of risk associated with one or other system. The higher 
level of transparency vis-à-vis this final user of a payment or securities transaction which is 
introduced by amendment 6 (2) can only be welcomed by the Commission. 
Amended proposal for a 
EUROPEAN PARLIAMENT AND COUNCIL DIRECTIVE 
ON SETTLEMENT FINALITY IN PAYMENT AND SECURITIES SETTLEMENT SYSTEMS 
V 
Common position of the Council Amendments by Parliament 
(Amendment 4) 
Article 11 
Article 11 Deleted 
In order to protect systems, each Member State 
may impose more stringent conditions on 
systems than those laid down by this Directive. 
(Amendment 5) 
Article 3(1) 
1. Transfer orders and netting shall be legally 
enforceable and, even in the event of insolvency 
proceedings against a participant, shall be 
binding on third parties, provided that transfers 
orders were entered into a system before the 
moment of opening of such insolvency 
proceedings as defined in Article 6(1) or if they 
were carried out on the day of opening of the 
insolvency proceedings unless the system was 
aware or should have been aware of the opening 
of such proceedings. 1. Transfer orders and netting shall be legally 
enforceable and shall be binding on third parties, 
even in the event of insolvency proceedings 
against a participant, provided that the transfer 
orders were entered into a system before the 
moment of opening of such insolvency 
proceedings as defined in Article 6(1). 
Where, in exceptional cases, transfer orders enter 
into a system after the moment of opening 
of insolvency proceedings and were settled on 
the day of such opening, they shall only be 
legally enforceable and binding on third parties 
if the settlement agent, the central counterparty 
or the clearing house can prove, after the 
moment of settlement, that they were unaware 
and should not have been aware of the opening 
of the insolvency proceedings. 
(Amendment 6) 
Article 10, second paragraph a and b (new) 
In addition to the notification provided for in the 
second paragraph above, Member States may 
impose supervision or approval on systems 
which fall under their jurisdiction. 
Whoever has a legitimate interest may require 
from an institution to be informed about the 
system in which it participates and about the 
main rules governing the functioning of such 
systems. 
^ 

ISSN 0254-1475 
COM(98) 151 final 
DOCUMENTS 
EN 09 10 
Catalogue number : CB-CO-98-155-EN-C 
ISBN 92-78-31987-2 
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