Opinion of the European Central Bank of 8 March 2002 at the request of the Danish Financial Supervisory Authority on a draft act amending the Securities Trading Act (CON/2002/8)
Date: 2002-03-08
Institutions: European Central Bank
Subjects: Denmark, financial stability, guarantee, national law, payment system, securities

EN

OPINION OF THE EUROPEAN CENTRAL BANK

of 8 March 2002

at the request of the Danish Financial Supervisory 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  of

Economics 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  by

national authorities regarding draft legislative provisions1, 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  stock

exchanges, establishes a register of employees with insider information and broadens the scope

of the prohibition against insider trading. The draft act may have an influence on the stability of

financial  institutions  and  markets  and  the  efficiency  of  payment  and  settlement  systems.  In

accordance  with  the  first  sentence  of  Article 17.5  of  the  Rules  of  Procedure  of  the  European

Central 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 securities

can  be  used  as  collateral  for  a  loan  even  before  the  exact  amount  of  the  loan  and,  thus,  the

amount of security required is known. Furthermore, the draft act clarifies the competencies of

various  bodies  within  the  area  of  stock  exchanges,  in  particular  the  right  to  approve

prospectuses for securities to be traded on a stock exchange. In addition, the draft act contains

provisions  concerning  the  protection  of  consumers’  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.

                                                     
(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 the

shares  in  the  company.  Finally,  it  is  suggested  that  the  prohibition  on  insider  trading  be

extended  to  cover  trade  with  UCITS  investment  certificates  which  are  not  listed  on  a  stock

exchange.

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  the

European  System  of  Central  Banks  are  not  prejudiced.  The  aim  here  is  to  minimise  risk  and

ensure  efficient  and  sound  clearing  and  payment  systems.  These  changes,  contained  in

Article 1(18) and (19), are two-fold. First, the draft act provides that the pool can also be used

for the settlement of non-trading related payments by a clearing institution. Secondly, and more

importantly, it provides that the pool of securities can be used as collateral for payment of a loan

before the exact amount of the loan and, thus, the amount of security required is known. As the

registration 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), the

establishment of the loan and the registration of the pledge need to take place before settlement

can take place. However, in some systems the 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 the

basis of an anticipated amount. The establishment of the pledge in advance of the settlement is

understood primarily to originate  from  the  preparations  for  the  Continuous  Linked  Settlement

project. 

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)  the

competencies 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  of

securities  trading  is  made  mandatory.  In  addition,  it  is  noted  that  in  view  of  the

internationalisation  and  privatisation  of  stock  exchanges  it  is  no  longer  appropriate  for  stock

exchanges 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, in

order to avoid, amongst others things, that a prospectus on shares issued by a stock exchange is

approved by  the stock  exchange itself. The draft act  enables  the  Danish  Securities  Council  to

delegate  its  powers  of  approval,  except  that  it  cannot  delegate  them  to  a  stock  exchange  in

relation 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 which

are traded on a stock exchange, and who have access to inside information of relevance to the

value  of  the  stocks.  The  register  contains  information  on  these  employees’  private  trading  in

shares  of  the  company  and  on  the  amount  of  shares  that  they  hold.  The  ECB  welcomes  this

2

initiative, 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 existing

rules 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 certificates

not listed on a stock exchange. Such certificates are in certain respects similar to shares listed on

a  stock  exchange,  and  to  avoid  unnecessary  legal  risk  these  certificates  are  covered  by  the

prohibition.

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

3