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)
Date: 1997-12-03
Institutions: European Monetary Institute
Subjects: Finland, financial supervision, national law, payment system, securities

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

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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 lay 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