Opinion of the European Monetary Institute at the request of the Bank of England under Article 109f(6) of the Treaty establishing the European Community (the “Treaty”) and Article 5.3 of the Statute of the EMI concerning the Financial Markets and Insolvency (Definition of Money Market Contract) Regulations 1997 (CON/97/28)
Date: 1998-02-06
Institutions: European Monetary Institute
Subjects: United Kingdom, financial stability, money market, national law, payment system

OPINION OF THE EUROPEAN MONETARY INSTITUTE

6 February 1998

at the request of the Bank of England under Article 109f(6) of the Treaty establishing the
European Community (the “Treaty”) and Article 5.3 of the Statute of the EMI concerning

the Financial Markets and Insolvency (Definition of Money Market Contract) Regulations

1997

(CON/97/28)

1.

On 31 October 1997 the EMI received from the Bank of England a request for an opinion on a

proposed  statutory  instrument,  the  Financial  Markets  and  Insolvency  (Definition  of  Money

Market Contract) Regulations 1997 (the “proposed regulations”).

2.

The EMI’s competence to deliver an opinion is based on Article 1.1, fourth and fifth indents, of

the  Council  Decision  of  22  November  1993  (93/717/EC)  on  consultation  of  the  EMI  by  the

authorities  of  the  Member  States  on  draft  legislative  provisions,  as  the  Regulations  contain

provisions concerning clearing and payment systems and rules applicable to financial institutions

which might influence the stability of financial institutions and markets.

3.

The purpose of the Regulations is to expand the existing definition in the relevant part of UK law

of  a  money  market  contract,  as  it  currently  appears  in  the  Financial  Markets  and  Insolvency

(Money Market) 1995 Regulations, (SI 1995/2049), at regulation 2. That definition states that a

money  market  contract  means  a  contract  for  the  acquisition  or  disposal  of  currency  of  the

United  Kingdom  or  of  any  other  country  or  territory.  The  proposed  regulations  expand  that

definition  by  adding  reference  to  the  ECU,  which  does  not  currently  fall  within  the  definition

because the ECU is a unit of account, rather than a currency.

4.

The  general  views  of  the  EMI  on  the  1995  regulations  referred  to  above  were  set  out  in  the

EMI’s  opinion  CON/95/10  dated  21st  July  1995.  In  that  opinion  the  EMI  expressed  its  support

for  the  overall  scope  and  purpose  of  those  regulations,  which  is  to  improve  the  security  and

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stability of the UK financial markets, in this case by applying special rules that take precedence

over the normal provisions of UK insolvency law in relation to the default of a member of certain

key clearing houses and exchanges.

5.

The  EMI  understands  that  the  purpose  of  the  proposed  regulations  is  to  ensure  that  spot  and

forward  contracts  in  ECU  are  capable  of  being  within  the  netting  and  settlement  scheme  of

ECHO,  the  only  foreign  exchange  clearing  system  to  which  the  1995  regulations  so  far  apply,

and welcomes the proposed regulations accordingly.

6.

The EMI has no objection to its opinion being made public.

6 February 1998.