OPINION OF THE EUROPEAN CENTRAL BANK
at the request of Danmarks Na tionalbank under Article 109f (6) of  the Treaty establishing the
European Community (the Trea ty) and Article 5.3 of the St atute of the EMI on a draft
legislative proposal concerning margin collateral in connection with clearing and settlement of
securities transactions
CON/98/20
1. The EMI has received a request from Danmarks Nationalbank dated 2 April 1998 for an
opinion on a draft legislation concerning margin  collateral in connection with clearing and
settlement of securities transactions (the leg islative proposal). In addition to a brief summary
of the legislative proposal in the English language (the summary), the EMI has receivedextracts of the bill (the Bill) amending the Da nish Securities Trading Act (the Act) and
extracts of the explanatory notes to the Bill amending the Act.
2. In accordance with Article 109l (2) of the Treaty, the ECB has taken over the advisory
functions of the EMI which has gone into li quidation upon the establishment of the ECB on 1
June 1998. The ECBs competence to deliver an  opinion is based on Article 1.1, fourth and
fifth indents, of the Council Decision (93/717/EC) of  22 November 1993 on the consultation of
the EMI by the authorities of the Member Stat es on draft legislative provisions, as the
legislative proposal contains provisions c oncerning multilateral netting in connection to
clearing and settlement of securities transacti ons involving financial institutions which may
influence the stability of financial institutions and markets.
3. The summary refers to the present Danish legislation on mulilateral netting in connection to
clearing and settlement of securities transac tions which ensures that multilateral netting can
take place irrespective of any compulsory winding -up procedure of a participant of a securities
settlement system under the Danish Act on Bankruptcy (the Bankruptcy Act), wherebyregistered transactions can be completed even when a participant beco mes insolvent. In this
connection, the ECB recalls an earlier consu ltation in 1995 on a Danish draft legal proposal
concerning the securities market legislation (Bill No. L 250, Folketinget 1994-1995;CON/95/9).
- 2 -
4. The present legislative proposal addresses th e possibility under the current legislation that
margin collateral in connection with clearing a nd settlement and securities transactions might
be challenged during the suspect period according to the Bankruptcy Act. The objective of the
legislative proposal according to the summary is to exclude the po ssibility to successfully
challenge such margin collateral under the Bank ruptcy Act during the suspect period. The ECB
welcomes this objective and agrees that such a legisative amendment should facilitate theparticipation of Danish credit institutions in  internationally operating clearing and settlement
systems located in other countries, and th ereby the cross-border use of securities.
5. The risk control measures proposed for the ESCB monetary policy framework have been
prepared taking into consideration differences in  euro area legal systems. It might be necessary
to consider again the consequences of the legislative proposal as it relates to the provision ofmargin collateral to ascertain its consistency with these ESCB risk control measures, should
Denmark decide to participate in EMU.
6. The ECB has no objection to this opinion being made public.
22 June 1998