EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 8 December 2008  
at the request of the French Ministry for Economic Affairs, Industry and Employment  
on a draft order relating to financial instruments 
(CON/2008/85) 
 
Introduction and legal basis  
On 31 October 2008 the European Central Bank (ECB) re ceived a request from the French Ministry for 
Economic Affairs, Industry and Employment for an opinion on a draft order relating to financial 
instruments and amending the Monetary and Financia l Code and the Commercial Code (hereinafter the 
‘draft order’). 
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and the third, fifth and sixth i ndents of Article 2(1) of Council Decision 98/415/EC 
of 29 June 1998 on the consultation of the European  Central Bank by national authorities regarding draft 
legislative provisions1, as the draft order relates to the Banque de France, payment and settlement systems 
and rules applicable to financial institutions insofar as they materially influence the stability of financial 
institutions and markets. In accordance with the first sen tence of Article 17.5 of the Rules of Procedure of 
the European Central Bank, the Governing Council has adopted this opinion. 
 1. Purpose of the draft order 
1.1. The draft order aims
2 at reforming the law applicable to financial instruments and market 
infrastructures with a view to: (i) reforming and simplifying the rules applicable to financial 
instruments by amending the definitions, terminolog y and presentation of the relevant provisions so 
as to make the law on securities more coherent an d to integrate and anticipate developments in 
European standards and internati onal agreements in the field of securities law; and (ii) amending 
the list of participants in a securities settlement sy stem for financial instruments so as to make these 
systems more stable. It also aims at reforming the indexing limits applicable to debt instruments and financial futures and introduces some amendments  to the rules applicable to negotiable debt 
securities ( titres de créance négociables ). 
                                                 
1  OJ L 189, 3.7.1998, p. 42. 
2  On the basis of the authorisation granted to the French Government by Article 152(1)(g) and (h) of Law No 2008-776 of 
4 August 2008 on the modernisation of the economy ( Journal Officiel de la République française  No 0181 of 
5 August 2008). 
2 1.2.  The draft order liberalises the indexing of de bt instruments and financial futures and introduces3 a 
new provision in the Monetary and Financial C ode (hereinafter the ‘Code’) which expressly 
authorises the indexing of debt instruments and financial futures without any restriction4. 
1.3. The reform of the rules applicable to financial instruments is largely a reorganisation of the existing 
provisions of the Code on financial instruments in  order to group them all in Book II of the Code. 
Among the provisions moved to Book II of the Code are the rules governing the transfer of ownership in financial securities
5. These rules first state the principle that transfer of ownership in 
financial securities results from the securities being entered on the acquiring party’s securities account. They then set out the detailed provisi ons, which remain unchanged in substance, 
applicable to the transfer of ownership: (i ) where financial securities are admitted to the 
transactions of a central custodian or delivered  to a securities settlement system for financial 
instruments
6; or (ii) where the securities settlement sy stem delivers the financial securities on the 
basis of continuous irrevocable settlement. The draft order also moves the rules relating to 
compensation and transfers of claims and to the gua rantee of financial obligations into Book II of 
the Code7. 
1.4. The provisions of the Code on financial instruments are reorganised around a new classification of 
financial instruments differentiati ng between financial securities ( titres financiers ) and financial 
futures ( contrats financiers ). The reason for introducing the c oncept of financial securities is to 
regroup within one legal category those instruments that present id entical formal characteristics 
such as dematerialisation and registration and that  are therefore subject to the same rules on 
holding of account, account-holders, tradability, etc.8. As regards voluntary or forced public 
auctions, this results in a broadening of the sc ope of the relevant provision to cover financial 
securities9, which also include negotiable debt secur ities. The draft order therefore includes a 
reference to the Banque de France in the list of  persons and entities entitled to hold voluntary or 
forced public auctions of financial securities, w ith the exception of auctions involving securities of 
public debt carried out for the account of the State which fall outside the scope of this provision of the Code. 
1.5. Moreover, the reform also entails the introduc tion of new principles governing financial securities. 
The draft order introduces the general principle acco rding to which financial securities are deemed 
to belong to the account holder
10. The draft order also contains a provision introducing in the Code 
                                                 
3  The draft order also abrogates the reference to such instrume nts in Article L. 112-3 of th e Monetary and Financial Code 
which allows indexing to the general level of prices by derogation to the general principle of prohibition (Article L. 112-1 
and Article L. 112-2, first paragraph, of the Code). 
4  Article L. 112-3-1 of the Code, as proposed by the draft order. 
5  Article L. 211-17 of the Code, as proposed by the draft orde r. The rules governing the transfer of ownership of financial 
instruments are currently part of Book IV of  the Code (Article L. 431-2 of the Code). 
6  Referred to in Article L. 330-1 of the Code. 
7  Articles L. 211-36 to L. 211-40 of the Code, as proposed by the draft order. These provisions are currently part of 
Book IV of the Code (Articles L.431-7 to L.431-7-5 (and Article D. 211-1A(II)). 
8  See the explanatory memorandum to the draft order relating to L.211-1, p. 2. 
9  Article L. 211-21 of the Code, as proposed by the draft order. 
10  Article L. 211-4 of the Code, as proposed by the draft order. 
3 the protection of an account holder’s right of ownership where financial securities have been 
acquired in good faith11. Further, the draft order introduces in the Code a provision pursuant to 
which the custody-account keeper may, subject to the conditions set out in the General Regulation 
of the Financial Markets Authority, allocate to a th ird party all or some of the tasks linked to its 
activity of custody-account keeping for financial securities12. As regards negotiable debt securities, 
the draft order ends the requirement for a fixed term13. 
1.6. The draft order14 clarifies and broadens the list of entities qualifying as participants in an interbank 
settlement system or a securities settlement syst em for financial instruments (hereinafter 
‘participants’) so as to include, inter alia , the central securities depositories and the operators of a 
securities settlement system for financial instruments. 
 2. General observations 2.1. The ECB welcomes the draft order’s aim
15 of improving the coherence and readability of the law 
on financial instruments, thereby enhancing the lega l certainty and clarity of French law in this 
area. 
2.2. The draft order reflects the work that has been  done at the level of the European Union (Legal 
Certainty Group)16 and at the global level (Unidroit)17 aiming to promote future legislative action to 
address the legal effects of book entries in securities accounts for the purpose of the acquisition, disposal and creation of security interests over securities, and related aspects, thereby 
complementing a range of other EU and non-EU initiatives. The introduction of clear concepts, 
such as financial securities and securities accounts, relating to both individual accounts and 
‘omnibus accounts’, as well as a clear description of the position of an account holder as owner of the securities is welcomed in this regard. 
 3. Specific comments 3.1. Protection of acquirers against reversal 
The draft order introduces in the Code a provision regarding the protection of an account holder’s 
right of ownership where financial secu rities have been acquired in good faith
18. At the 
international level, concerns have been raised  about the need for an account holder acquiring 
                                                 
11  Article L. 211-16 of the Code, as proposed by the draft order. 
12  Article L. 211-8 of the Code, as proposed by the draft order. 
13  Article L. 213-1 of the Code, as proposed by the draft order. 
14  Article L. 330-1 of the Code, as proposed by the draft order. 
15  See the explanatory memorandum to the draft or der relating to Article 2 of the draft order. 
16  See the Second Advice of the Legal Cert ainty Group entitled ‘Solutions to Legal Barriers related to Post-Trading within 
the EU’, August 2008 (available at: http:// ec.europa.eu/internal_market/financial-
markets/docs/certainty/2nda dvice_final_en.pdf). 
17  See the Draft UNIDROIT Convention on substantive rules re garding intermediated securiti es, 12.9.2008 (available at: 
http://www.unidroit.org/). 
18  Article L. 211-16 of the Code,  as proposed by the draft order. 
4 financial instruments to be able to rely on a credit on his account and for a harmonised protective 
rule in this regard. The abovementioned provision introduced in the Code suggests that a reversal 
can only be requested in the case of the account holder’s bad faith. In addition, the relevant provision of the draft order links the protection of the holder of the securities to the crediting of the book-entry securities to the acquirer’s securities accoun t. The ECB assumes that the application of 
the provision introduced by the draft order
19 will result in an adequate level of protection for the 
acquirer of book-entry securities and considers that fl exibility should be maintained with respect to 
a possible further harmonisation that could result from the ongoing work in this area at the European and international level. The ECB theref ore welcomes the new provision proposed by the 
draft order
20 as a first step in this direction. 
3.2. List of participants 
The draft order extends the list of entities qualifying as participants to include, inter alia , the 
central securities depositories and the operators of a securities settlement system for financial 
instruments21. The draft order therefore clarifies in a legislative provision that central securities 
depositories qualify as participants, even though they  are not credit institutions, thereby increasing 
legal certainty. With regard to the inclusion of the operators of a securities settlement system for 
financial instruments as participants, the ECB not es that the draft order anticipates the expected 
changes22 to Directive 98/26/EC on settlement fina lity in payment and securities settlement 
systems23 (hereinafter the ‘SFD’). Moreover the list of entities qualifying as participants 
corresponds to a large extent to the definition of  participant as provided for in the SFD. In this 
regard, the ECB suggests examining whether reference to ‘members  of a clearing house’24, should 
be broadened to ‘clearing house’, as is the case in the SFD25, as such change may be of relevance 
with regard to foreign clearing houses. 
3.3. Access to a securities settlemen t system for financial instruments 
The Code26 provides that a securities settlement system  for financial instruments may refuse, on 
legitimate commercial grounds, access by credit institu tions and investment companies with their 
registered office or, otherwise, their effectiv e headquarters in another member state of the 
European Community or in another state that is a member of the European Economic Area. Against 
this background, the ECB draws attention to th e draft ESCB/CESR recommendations for securities 
                                                 
19  Article L. 211-16 of the Code, as proposed by the draft order. 
20  Article L. 211-16 of the Code, as proposed by the draft order. 
21  Article L. 330-1.II of the Code, as proposed by the draft order. 
22  See in this respect the revised Presidency Compromise on a  Proposal for a directive of the European Parliament and of 
the Council amending Directive 98/26/EC on settlement finality in payment and securities settlement systems and 
Directive 2002/47/EC on financia l collateral arrangements as regards linked systems and credit claims (available at: 
http://register.consilium.eu ropa.eu/pdf/en/08/st11/st11968-re02.en08.pdf) (Article 2). 
23  Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998, OJ L 166, 11.6.1998, p. 45 
(Article 2). 
24  Article L. 330-1.II, first paragraph, point.3  of the Code, as proposed by the draft order. 
25  Clearing houses are covered by the definition of pa rticipant in a system (Article 2(f) of the SFD). 
26  Article L. 330-1.I, fourth paragraph, of the Code; Article L.330-1.II. third paragraph, of the Code, as proposed by the 
draft order.  
5 settlement systems, which invite public authorities to ensure that central securities depositories, 
including the securities settlement systems opera ted by these entities, expressly limit rules and 
requirements restricting access to those aimed at controlling risk27. Although an amendment of the 
abovementioned provision would go beyond the scope of  the draft order, the ECB considers that, in 
the context of a reform of the law applicable to market infrastructures, it could be useful to amend 
the rules governing access to a securities settlement sy stem for financial instruments accordingly. 
3.4. Outsourcing the activity of central securities depositories 
The draft order provides that a custody-account keeper may allocate to a third party all or some of 
the tasks related to its activity of cust ody-account keeping for financial securities28. The ECB 
understands that no specific rules currently apply to  the outsourcing by a French central securities 
depository of all or part of its operations to another entity. In this respect, although this would go 
beyond the scope of the draft order, the ECB would like to point out that it could be useful from the 
point of view of promoting further integration of European securities infrastructures to introduce 
requirements in respect of outsourcing to thir d parties the activities of the central securities 
depositories conducting se ttlement functions. 
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 8 December 2008. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET 
                                                 
27  See the draft ESCB/CESR recommendations for securities settlement systems and draft recommendations for central 
counterparties, CESR/ESCB consultati on paper, CESR/08-749, October 2008 and more particularly Recommendation 14 
on access (Part 1, Recommendations for securities  settlement systems, pp. 64-66. (available at 
http://www.ecb.int/paym/cons/html/esc b-cesr.en.html or http://www.cesr-
eu.org/index.php?page=contenu_hearings_details&id=91). 
28  Article L. 211-8 of the Code, as proposed by the draft order.