EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 16 March 2009 
at the request of the Cypriot Ministry of Finance  
on a draft law amending the Securities and Cy prus Stock Exchange (Central Depository and 
Central Securities Registry) Laws of 1996 to 2008 
(CON/2009/21) 
 
Introduction and legal basis  
On 20 February 2009, the European  Central Bank (ECB) received a request from the Cypriot Ministry of 
Finance for an opinion on a draft law amending th e Securities and Cyprus Stock Exchange (Central 
Securities Depository and Central Registry) Laws of  1996 to 2008 (hereinafter the ‘draft law’). 
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and on the fifth indent of  Article 2(1) of Council Decision 98/415/EC of 
29 June 1998 on the consultation of the European Ce ntral Bank by national authorities regarding draft 
legislative provisions1, as the draft law relates to payment and settlement systems. In accordance with the 
first sentence of Article 17.5 of the Rules of Proc edure of the European Central Bank, the Governing 
Council has adopted this opinion. 
 1.  Purpose of the draft law The ECB understands that the purpose of the draft law is to accommodate specific comments of the ECB 
made in two of its previous opinions  on draft legal acts of relevance to the Cyprus Stock Exchange (CSE) 
and/or to the CSE’s Central Depository and Central Securities Registry (CDCR)
2. In particular, and in 
line with recommendations previously made by the ECB3, the draft law proposes amendments to 
Sections 3 and 6 of the Securities and Cyprus Stock Exchange (Central Depository and Central Securities 
Registry) Laws of 1996 to 2008 (hereinafter the ‘Basic Law’), which is intended to limit the scope of the 
CSE Council’s decision-making powers to technical issues only4, thereby avoiding the risk of any undue 
                                                 
1   OJ L 189, 3.7.1998, p. 42. 
2   See ECB Opinion CON/2006/9 of 22 February 2006 at the re quest of the Cypriot Ministry of Finance on a draft law 
amending the Cyprus Securities and Stoc k Exchange (Central Depository and Cent ral Securities Registry) Laws of 1996 
to 2005 and ECB Opinion CON/2006/37 of 11 July 2006 at the reque st of the Cypriot Ministry of Finance on two draft 
regulatory decisions issued by the Cyprus Stock Exchange Council. 
3   See paragraphs 4.1 and 5.2 of ECB Opinion CON/2006/9, and paragraphs 3.3 and 3.5 of ECB Opinion CON/2006/37. 
4   On the issue of the competences of the CSE Council and of  the nature of its rule-maki ng powers see, in particular, 
paragraphs 1.2, 3.1 and 4. 1 of ECB Opinion CON/2006/9. 
2 interference with settlement finality-related issues, and to clarify the scope of the CSE’s liability vis-à-vis 
its clients arising from the operation of the CDCR and with regard to the correct recording of stock 
exchange data and/or transactions. Subject to its observations below, the ECB is pleased to note the 
consulting authority’s initiative to address e xpressly the abovementioned outstanding issues.  
 2.  Specific observations 2.1  Observations on the proposed amendments  to Section 6 of the Basic Law  
2.1.1  The ECB understands that the objective of the proposed amendments to Section 6 of the Basic Law 
is to remove any remaining doubts as to the exte nt of the liability of the CSE Council arising from 
the operation of the CDCR. At present, subject to certain exceptions
5, the CSE’s liability is not the 
subject of comprehensive statutory regulation, eith er in the Basic Law or in the CSE Regulations. 
To the extent the proposed amendmen ts to Section 6 would confirm that the CSE, in its capacity of 
owner and operator of the CDCR, is subject to the general principles of the law of tort in Cyprus (astika adikimata )
6, whether by way of an action for negligence in the exercise of a statutory power 
or, alternatively, for breach of st atutory duty giving rise to  a private, civil cause of action, the ECB 
has no comments on the overall thrust of th e proposed amendments to Section 6.  
2.2  Observations on the proposed amendments  to Section 3 of the Basic Law  
2.2.1  The ECB has the following comments on Section 3 of the Basic Law, which currently provides that 
the CSE has the power to ‘establish, manage and operate’ the CDCR, as speci fied in the Basic Law 
and the Regulations and/or Regulatory Decisions  issued thereunder. In line with the ECB’s 
previous opinions and having regard to the im plementation of the Settlement Finality Directive 
(SFD)7, Section 3 of the Basic Law would benefit from clarification to the effect that the CSE’s 
decision-making powers relate to technical issues only, to be defined within the boundaries of the 
clearing and settlement framework laid down by na tional legislation. Moreover, and despite the 
fact that Sections 17A and 24 of the Basic Law al ready refer to the national implementation of the 
SFD8, the proposed amendments to Section 3 do not, in the ECB’s view, go far enough towards 
addressing unequivocally the concerns previously  expressed by the ECB in its opinions. As the 
differences between Section 3, as it currently stands , and a revised Section 3 would only be very 
slight and would require deductions to be made in  order for conclusions to be drawn regarding the 
                                                 
5 The only express references to liabilit y-related issues are to be found in: (i ) Section 17A of the Basic Law, which 
excludes the liability of the CSE’s Director General vis-à-vis any affected party/ies where the Director General has intervened to correct mistaken entries in the CDCR Regi ster, provided that they have acted in good faith; and 
(ii) Regulations 16(3) and 16(4) of the Securities and St ock Exchange (Registration, Trading and Settlement of 
Dematerialised Securities) Re gulations of 2001 to 2005, excluding the liability of the Director or of the CSE vis-à-vis 
CSE Members or third parties where the Director has take n measures (or desisted from so doing) with a view to 
completing the clearing and settlement of a transaction over listed securities or their delivery where the competent CSE 
Member has failed to fulfil its relevant obligations.    
6 See the Civil Wrongs Law (Cap. 148, as amended).  
7   Directive 98/26/EC of the European Parliament and of th e Council of 19 May 1998 on settlement finality in payment and 
securities settlement systems, OJ L 166, 11.6.1998, p. 45. 
8   Settlement Finality in Payment Systems an d Securities Settlement Systems Law of 2003. 
3 limits to the CSE Council’s rule-making powers, th e ECB would invite the consulting authority to 
reflect more expressly in the draft law itself the objectives conveyed in its accompanying explanatory note.  
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 16 March 2009 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET