OPINION OF THE EUROPEAN MONETARY INSTITUTE
at the request of the Finnish Ministry of Finance under Article 109f (6) of the Treaty
establishing the European Community and Article 5.3 of the Statute of the EMI on draft
legislative proposals to amend the Securities Markets Act and certain other legislative
provisions relating to the clearing of securities trading
CON/97/29
1. On 11 November 1997 the EMI received a request from the Finnish Ministry of Finance for an
opinion on draft legislative proposals to amend the Securities Markets Act and other legislative
provisions (“the legislative proposals”). The legislative proposals are set out in a Government
report on proposed draft legislation concerning the clearing of securities trading (“Hallituksen
esitys Eduskunnalle laiksi arvopaperimarkkinalain muuttamisesta sekä muuksi arvopaperikaupan
selvitystoimintaa koskevaksi lainsäädännöksi”) (“the report”). The EMI has also received an
explanatory memorandum from the Ministry of Finance containing an English translation of the
legislative proposals.
2. The EMI’s competence to deliver an opinion is based on Article 1, section 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 States on draft legislative provisions, as the legislative
proposals contain rules relating to clearing and settlement operations and include provisions
aimed at enhancing the stability of financial institutions and markets in relation to securities
trading.
3. The EMI notes the definitions of the legislative proposals and that clearing shall refer to the
determination and the exercise of the obligations resulting from public trading of securities on
behalf of parties to the transaction. Clearing shall also refer to the determination and exercise of
the obligations resulting from a transaction or a transfer of ownership of securities which does
not take place through public trading when such securities are incorporated in the book-entry
- 2 -
system or subject to public trading. Clearing may be carried out only by a clearing house which
has obtained a licence from the competent Ministry. The report also states that clearing shall be
supervised by the Financial Supervisory Authority. The EMI welcomes the requirement to obtain
a licence to operate a clearing house and the involvement of the Financial Supervisory Authority
and would generally endorse the objectives behind the legislative proposals set out in the report.
4. The legislative proposals also l ay down certain requirements for securities intermediaries and for
clearing parties and set out the obligations of such parties. The EMI notes these provisions and
welcomes the legislative proposals, which, in view of inter alia their prudential supervisory
aspects, should promote the sound functioning of the Finnish system for the clearing of securities
trading and, in particular, the soundness of clearing houses and their participants as well as the
safety of operations. The EMI also welcomes the legislative proposals contained in Section 5a of
Chapter 4 of the proposed draft Act on the Amendment of the Securities Markets Act, whereby
securities intermediaries shall keep client funds segregated from their own funds and assets
(which, according to the proposed amendment of Section 52 of the Act on Investment Firms,
shall apply also to investment firms).
5. The EMI also notes and welcomes the proposed wording of Section 28 of the Act on the Book-
Entry System, whereby inter alia foreign central securities depositories or other supervised
foreign organisations may be allowed to register as nominee registration custodians in the Finnish
book-entry system. Such an arrangement should facilitate the cross-border use of Finnish
securities as collateral, which will prove positive for the development and integration of the euro
market in Stage Three of EMU, as well as for the liquidity of Finnish securities in general.
6. The EMI has no objection to this opinion being made public.
3 December 1997