EN
OPINION OF THE EUROPEAN CENTRAL BANK
of 8 March 2002
at the request of the Danish Financial Superv isory Authority on a draft act amending the
Securities Trading Act
(CON/2002/8)
1. On 18 February 2002 the European Central Bank (ECB) received a request via Danmarks
Nationalbank from the Danish Financial Supervisory Authority on behalf of the Ministry ofEconomics and Business Affairs  for an opinion on a draft act amending the Securities Trading
Act (hereinafter referred to as the draft act'). 
2. The ECBs competence to deliver an opinion is based on Article 105(4) of the Treaty
establishing the European Community and the fifth and sixth  indents of Article 2(1) of Council
Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank bynational authorities regarding draft legislative provisions
1, as the draft act, amongst other things,
contains provisions extending an existing right to take a pledge from a pool of securities,clarifies the various competencies of the different Danish authorities with regard to stockexchanges, establishes a register of employees with insider information and broadens the scopeof the prohibition against insider trading. The draft act may have an influence on the stability offinancial institutions and markets and the efficiency of payment and settlement systems. Inaccordance with the first sentence of Article 17.5 of the Rules of Procedure of the EuropeanCentral Bank, this opinion has been adopted by the Governing Council of the ECB.
3. The draft act concerns an extension of an existing right to take a pledge from a pool of securities
in connection with the clearing and settlement of payments. It ensures that a pool of securitiescan be used as collateral for a loan even before the exact amount of the loan and, thus, theamount of security required is known. Furthermore, the draft act clarifies the competencies ofvarious bodies within the area of stock exchanges, in particular the right to approveprospectuses for securities to be traded on a stock exchange. In addition, the draft act containsprovisions concerning the protection of consum ers rights, but these will not be analysed
further here. Moreover, the draft act establishes a register containing information on
                                                     
1 OJ L 189, 3.7.1998, p. 42.
2(i) employees of companies the stocks of which are traded on a stock exchange who have access
to inside information of relevance to the value of the stocks; and (ii) their private trading in theshares in the company. Finally, it is suggest ed that the prohibition on insider trading be
extended to cover trade with UCITS investment certificates which are not listed on a stockexchange.
4. The ECB welcomes the proposal to extend the existing right to take a pledge from a pool of
securities in connection with the clearing and settlement of payments, insofar as rights of theEuropean System of Central Banks are not prejudiced. The aim here is to minimise risk andensure efficient and sound clearing and payment systems. These changes, contained inArticle 1(18) and (19), are two-fold. First, the dr aft act provides that the pool can also be used
for the settlement of non-trading related payments by a clearing institution. Secondly, and moreimportantly, it provides that the pool of securities can be used as collateral for payment of a loanbefore the exact amount of the loan and, thus, the amount of security required is known. As theregistration of the pledge is done in the Central Securities Depository (Værdipapircentralen),and the settlement of the payment is done in a payment system (i.e. in two different entities), theestablishment of the loan and the registration of the pledge need to take place before settlementcan take place. However, in some systems th e borrower only knows the exact size of the loan
after the settlement has begun, for which reason there is a need to establish the pledge on thebasis of an anticipated amount. The establishment of the pledge in advance of the settlement isunderstood primarily to originate from the preparations for the Continuous Linked Settlementproject. 
5. The ECB understands that under current legislation there is a certain overlap of competencies
between the relevant Danish authorities. The draft act clarifies in Article 1(1)-(12) thecompetencies within the area of stock exchanges.  Amongst other things, the existing right of the
Danish Securities Council (Fondsrådet) to issue rules of best practice within the field ofsecurities trading is made mandatory. In addition, it is noted that in view of theinternationalisation and privatisation of stock exchanges it is no longer appropriate for stockexchanges to approve prospectuses for securities to be traded on a stock exchange. Therefore,the competence is transferred to the Danish Securities Council, which is a public authority, inorder to avoid, amongst others things, that a prospectus on shares issued by a stock exchange isapproved by the stock exchange itself. The draft act enables the Danish Securities Council todelegate its powers of approval, except that it cannot delegate them to a stock exchange inrelation to its own shares.
6. Moreover, the draft act draws, in Article 1(14) and (15), on international experience by
establishing a register containing information on employees of companies the stocks of whichare traded on a stock exchange, and who have access to inside information of relevance to thevalue of the stocks. The register contains information on these employees private trading inshares of the company and on the amount of shares that they hold. The ECB welcomes this
3initiative, which further enhances the transparency of the securities market and should have a
preventive effect against insider trading. The register will be established in addition to existingrules concerning disclosure of possession of shares or voting rights above certain thresholds. 
7. Finally, the ECB welcomes the suggestion that the prohibition on insider trading be extended
under Article 1(13) of the draft act, in order to cover trade with UCITS investment certificatesnot listed on a stock exchange. Such certificates are in certain respects similar to shares listed ona stock exchange, and to avoid unnecessary legal risk these certificates are covered by theprohibition.
8. The ECB confirms that it has no objection to the competent national authorities making this
opinion publicly available at their discretion.
Done at Frankfurt am Main on 8 March 2002.
The President of the ECB
[signed]
Willem F. DUISENBERG