Opinion of the European Central Bank of 12 June 2003 at the request of the Council of the European Union on a proposal for a Directive of the European Parliament and of the Council on investment services and regulated markets, and amending Council Directive 85/611/EEC, Council Directive 93/6/EEC and European Parliament and Council Directive 2000/12/EC (COM(2002) 625 final) (CON/2003/9)
Date: 2003-06-12
Institutions: European Central Bank
Subjects: approximation of laws, financial market, free movement of capital, investment company, securities

C 144/6

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Official Journal of the European Union

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EUROPEAN CENTRAL BANK

OPINION OF THE EUROPEAN CENTRAL BANK

of 12 June 2003

at the request of the Council of the European Union on a proposal for a Directive of the European
Parliament and of the Council on investment services and regulated markets, and amending
Council Directive 85/611/EEC, Council Directive 93/6/EEC and European Parliament and Council
Directive 2000/12/EC (COM(2002) 625 final)

(CON/2003/9)

(2003/C 144/06)

from the Council of

1. On 16 December 2002 the European Central Bank (ECB)
received a request
the European
Union for an opinion on a proposal for a directive of
the European Parliament and of the Council on investment
services and regulated markets, and amending Council
Directive 85/611/EEC, Council Directive 93/6/EEC and
European Parliament and Council Directive 2000/12/EC
(COM(2002) 625 final)
referred to as the
‘proposed directive’).

(hereinafter

2. The ECB's competence to deliver an opinion is based on
the first indent of Article 105(4) of the Treaty establishing
the European Community (hereinafter referred to as the
‘Treaty’) and Article 3.3 of the Statute of the European
the European Central
System of Central Banks and of
Bank (hereinafter referred to as the ‘Statute’), since the
proposed directive contains provisions with a bearing on
the integration of European financial markets with possible
effects on financial stability. In accordance with the first
sentence of Article 17.5 of the Rules of Procedure of the
ECB, the Governing Council of the ECB has adopted this
opinion.

3. The main objective of the proposed directive is to update
the regulatory framework for investment services in order
to take into account the fundamental changes that have
taken place in European financial markets in recent years.
Since the adoption of Council Directive 93/22/EEC of 10
May 1993 on investment services in the securities field (1)
(ISD), developments in information technology have had
substantial consequences for the structure and efficiency of
securities markets. At the same time, there has been a
considerable increase in cross-border transactions, due to
the introduction of the euro, which has accelerated the
need for a truly integrated European securities market.

(1) OJ L 141, 11.6.1993, p. 27.

4. Against this background, the ECB broadly welcomes and
supports the proposed directive, which aims at improving
the level of regulatory harmonisation and to extend it to
new investment services and financial
instruments. The
proposed directive deals with new issues arising from the
increased competition among stock exchanges and new
order-execution platforms,
laying down rules to ensure
that different execution venues are subject to the same
set of rules and are therefore able to compete with one
another while guaranteeing investor protection, market
transparency and efficiency. In order to attain the above-
the proposed directive lays down a
mentioned goals,
the trading
comprehensive set of rules concerning all
venues, namely regulated markets, multilateral
trading
facilities (MTFs) and intermediaries that execute client
orders
the
proposed directive could further clarify a number of
issues, as explained below.

internally. However,

the ECB finds

that

and

flexible

effective,

In the light of

to make EU securities
transparent,

5. First, the application of the legislative methodology recom-
mended by the Committee of Wise Men on the Regulation
of European Securities Markets (Committee of Wise Men).
Generally, the ECB welcomes the use of the comitology
procedure in the proposed directive, as recommended by
the Committee of Wise Men. The Committee of Wise
legislation
Men's Report aims
more
allowing
adequate and timely response to dynamic market devel-
opments.
the choice of
legal instruments — either directives or regulations — is
an important issue. As the Committee of Wise Men stated
leave more latitude for Member States to
‘[Directives]
implement Community Law but
too often lead to
uneven transposition and different interpretations’. In the
terminology of the Committee of Wise Men the proposed
directive falls under the category of ‘Level 1’ legislation, i.e.
‘framework principles’. It sets ‘key political choices to be
taken by the European Parliament and the Council of
Ministers’
services.
Framework principles should be implemented by way of

this objective,

financial

in the

core

area

of

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in Article 3(1) of

as regards the dividing line between the Framework Prin-
ciples pertaining to Level 1 and the detailed implementing
rules to be left to Level 2. As a possible guiding principle,
the scope of rules to be adopted through Level 2 legis-
lation could be extended as far as possible in order to
achieve a high degree of both harmonisation and flexibility
in the regulation of European securities markets. As a
specific example, the ECB notes that the ‘basic definitions’
set out
the proposed directive may
benefit from detailed implementing rules at Level 2 in so
far as they need clarification (Article 3(2)). Particularly with
regard to the definition of ‘financial instruments’, it would
be expedient to include the ability to amend the list in
Section C of Annex I by way of Level 2 comitology, if
in order
necessary within certain conceptual boundaries,
not to alter the scope of the proposed directive. This route
would facilitate having basic framework principles in a
directly applicable single European act with primacy
the EU. Recent discussions in comitology
throughout
fora have highlighted possible
for
recourse to either regulations or directives at Level 2.
The ECB would support the possible use of directives in
‘Level 2 Implementation Legislation’ wherever there was a
need to take into account national specificities in detail.
Finally, the ECB notes that, in general, the national central
banks of Member States (NCBs) should be closely involved
in the preparation of implementing measures relating to
their respective competencies (e.g. clearing and settlement
systems: see also paragraphs 18 to 22 of this opinion).

general

criteria

acts

legislation:

that Regulations

the proposed directive,

‘Level 2’ Community legislation, rather than implemented
by the Member States, since this national implementation
would lead to a diversified legal situation. Basic framework
principles
should be the same and apply uniformly
throughout the EU. Either Member States are not given
any latitude to implement
in
which case the use of a directive is inappropriate, or
they are given discretion and the ‘framework principles’
lead to differences within the EU. If both ‘Level 1’
will
requiring national
are directives
and ‘Level 2’
implementation, this will not ultimately solve one of the
problems outlined by the Committee of Wise Men as
delaying the development of European securities markets,
namely,
‘the absence of clear Europe-wide regulation’. In
fact, the Committee of Wise Men stated, regarding Level 1
‘Framework’
‘More use should be made of
Regulations, rather than Directives . . . The Committee
should be used whenever
considers
the
possible’. The ECB supported the conclusions of
Committee of Wise Men, as indeed did the Stockholm
European Council of March 2001 endorsing its Report.
The ECB notes that indeed regulations offer significant
advantages as opposed to directives, as they are directly
applicable in the Member States without any need of
implementation
The
resulting uniformity at the level of basic framework prin-
ciples should lead to a ‘Level 2’ Community implemen-
tation that may take into account national specificities in
the detail. The need to accommodate national technical
specificities arises at Level 2, as it deals with specific
implementing measures, whereas Level 1 only sets out
the basic framework principles of
the legislation in
question. Therefore, the ECB would generally favour that
in future Community legal acts containing such basic
framework principles
take the format of Regulations
instead of Directives, leaving the implementation of such
principles to ‘Level 2’ legislation by way of the comitology
procedure taking into account national technical needs.

legislation.

national

through

clear

instances,

framework

6. The Committee of Wise Men Report stresses that financial
legislation should demonstrate a
and effective
dividing line between the Framework Principles (‘Level 1’)
and detailed implementing rules (‘Level 2’). However, this
dividing line is not evident in the proposed directive. In
some
already
formulated in a very detailed manner (e.g. the provisions
concerning the conditions and procedures for author-
in contrast,
isation in Title II Chapter
framework principles are considerably more abstract and
a wide range of provisions will require definition by way
of Level 2 legislation (e.g. the operating conditions for
investment firms laid out in Title II Chapter II). The ECB
considers that the proposed draft could be further refined

I). Elsewhere,

principles

are

7. Second, the exemptions from the scope of the proposed
directive. The ECB notes that Article 2.1(f) and Article 2.2
exempt members of the European System of Central Banks
(ESCB) from the application of the proposed directive. The
ECB welcomes such rules, which reproduce exemptions
already contained in the current ISD while taking into
account the new institutional framework set out by the
Treaty, as according to Article 107 of the Treaty and
Article 1.2 of
the ESCB is
the ESCB/ECB Statute,
composed by the ECB and by national central banks of
all Member States. More specifically, Article 2.2 of the
proposed directive updates
current wording of
the ISD. The ECB welcomes this rule,
Article 2.4 of
which recognises that, on the basis of
the proposed
directive,
firms do not have an automatic
right to become counterparties of the NCBs. In fact, the
particular nature of the functions performed by the NCBs
in the Eurosystem justifies a special legal regime, as estab-
lished by the Treaty and the Statute, which secondary
Community law cannot derogate from, and underlined in
particular by their independent status. It should be recalled
that Article 105 of the Treaty lists the basic tasks to be

investment

the

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including

operational

additional
all

subscribed by the NCBs

carried out by the ESCB, (namely to define and implement
the monetary policy of the Community, to conduct foreign
exchange operations,
to hold and manage the official
foreign reserves of the Member States and to promote
the smooth operation of payment systems) in observance
of the guidelines adopted by the ESCB's decision-making
bodies. The ECB and the NCBs in the Eurosystem have
specific
the
tasks,
conduct of
types of banking transactions with
countries outside the Eurosystem and with international
organisations pursuant to Article 23 of the Statute and,
in the case of the ECB, the management of the ECB's
capital,
in accordance with
Articles 28 and 29 of
the Statute. With regard to
monetary policy operations, the ECB wishes to underline
that Guideline ECB/2000/7 of 31 August 2000 on
monetary policy instruments and procedures of the Euro-
system (1), and in particular Annex 1 thereof
(General
policy
Eurosystem monetary
Documentation
instruments and procedures), provides that counterparties
to Eurosystem monetary policy operations must
fulfil
criteria which are defined on a
certain eligibility
is to give a broad
non-discriminatory basis. The goal
Eurosystem
credit
of
range
monetary policy
equal
the euro area whilst
treatment of
ensuring that eligible Eurosystem counterparties
fulfil
certain operational and prudential
requirements. The
exemptions in Articles 2.1 and 2.2 reduce any uncertainty
regarding the scope of rights conferred by the proposed
directive, and remove a possible misconception that the
firms obtaining an
ISD would result
in investment
automatic right
for central
bank operations.

to become counterparties

institutions
operations,

institutions across

access
thus

enhancing

on

to

investment

firms). The ECB welcomes

trading process and finalisation of

(operating conditions for investment

8. Third, the rules concerning intermediaries. In accordance
with Article 1(2) of the proposed directive, credit insti-
tutions performing investment services will be subject to
the provisions of Articles 12 and 13 (organisational
trans-
requirements,
actions in an MTF) as well as to Chapters II and III of
firms and
Title II
rights of
the
application of these provisions to credit
institutions in
order to safeguard a level playing field among market
participants
an
adequate coordination with the provisions of Directive
2000/12/EC. Moreover,
that
the
Chapter II of Title IV, dealing with cooperation between
competent authorities of different Member States, will
nevertheless
cross-border
apply with regard to the
provision of investment services by credit institutions. In
effect, these provisions regulate supervisory cooperation in
a manner
to the cross-border provision of
investment services, for instance with due regard to retail
they are
investor protection issues, whether or not

and trading venues

and to ensure

understands

specific

ECB

institutions. Therefore,

the ECB
provided by credit
understands that the aforementioned Chapter II of Title
IV will necessarily cover credit
institutions just as any
other type of investment service providers. The ECB also
notes the possible need to revise Annex I of Directive
2000/12/EC, which contains the list of activities subject
to mutual recognition. The competent fora of the banking
sector could verify the extent to which such revision might
be warranted.

In order

to tackle

9. In addition, the ECB notes that, according to Article 62 of
the proposed directive,
investment firms providing only
the service of investment advice will be exempted from
the capital adequacy requirements of Council Directive
93/6/EEC of 15 March 1993 on the capital adequacy of
investment firms and credit institutions (2) (CAD). In effect,
as stated in Section III.1 of the explanatory memorandum,
investment advice does not give rise to market risk or
systemic risk, which are the regulatory underpinnings of
the CAD. Investment advice may instead be a source of
operational risk, since firms failing to comply with due
diligence standards may be asked to compensate individual
clients accordingly, therefore potentially affecting the firm's
the potential need to
stability.
the proposed
compensate investors, Article 11(2) of
directive introduces an obligation for investment
firms
providing only investment advice to hold professional
indemnity insurance as an alternative
to the initial
capital requirements of the CAD. In this respect, the ECB
would like to draw attention to the fact that operational
risk is gaining increasing recognition in the regulatory
framework, given its potentially damaging effects to an
institution's stability. In particular, it is foreseen that oper-
ational risk, also deriving from the provision of investment
to the revised EU capital
advice, will become subject
firms.
adequacy framework for banks and investment
firms providing only investment
Therefore,
to capital
in the future, also be subject
advice may,
requirements
risk of such
relating to the operational
activity. The ECB therefore suggests that any alternative
solutions to the general capital requirements provided for
in the CAD should be carefully considered, and even
limited in scope, in view of the forthcoming revision of
the capital adequacy framework.

investment

10. Furthermore, the ECB shares the concern addressed by the
proposed directive as regards the need to take effective
measures
interest. The
proposal provides for such measures in two instances. In
investment firms
accordance with Article 16(1) and (2),

against possible

conflicts of

(1) OJ L 310, 11.12.2000, p. 1, as amended by Guideline ECB/2002/2

of 7 March 2002 (OJ L 185, 15.7.2002, p. 1).

(2) OJ L 141, 11.6.1993, p. 1, as last amended by European Parliament
and Council Directive 98/33/EC (OJ L 204, 21.7.1998, p. 29).

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either

activities

to manage

to prevent or

trading venues

the proposed directive

interest provisions.
firms

will be required to identify potential conflicts of interest in
and to set up adequate operational
their
arrangements
such
conflicts to avoid adverse effects. Under Article 36(1)(a),
likewise be required to have
regulated markets will
arrangements
the potential
to identify and manage
adverse consequences of conflicts of interest, in particular
where they may arise from regulatory functions delegated
to the market by the competent authority. The ECB
welcomes these provisions, in particular as it agrees with
the Commission's general assessment in the explanatory
memorandum that the potential for conflicts of interest
increased competition
may intensify in the context of
trade execution and
between the different methods of
In
the same kind.
also between trading venues of
the ECB considers that adequate conflict of
addition,
interest provisions across
could also
contribute to ensure a level playing field among market
players. The ECB would like to put forward the following
comments with a view to enhancing the relevant conflict
of
requires
First, Article 16(2)
to take preventive measures against
investment
possible conflicts of
interest between themselves and
their clients or to establish and operate organisational
and administrative arrangements to manage such conflicts.
However,
read as
providing for preventive and protective requirements as
alternatives, however, these are generally viewed, also in
academic literature, as complementary in the context of
the
and of
intermediaries
investor protection in particular. For instance,
it seems
reasonable to report
the existence of a conflict of
interest to a client prior to the execution of a transaction,
and not only once such a conflict emerges as prejudicial.
Against this background, the ECB finds that the proposed
Article 16(2) should regard preventive and protective
measures against conflicts of interest as complementary
instead as alternatives. This would also be in line with
the proposed wording of Article 36(1)(a). Second,
the
ECB welcomes the opportunity to make Article 16(2)
more effective through Level 2 legislation. The ECB
notes, however,
the other provision dealing with
conflicts of interest in the proposed directive (the afore-
mentioned Article 36 dealing with regulated markets) does
not provide for similarly detailed implementing measures.
In the light of the importance of effective measures against
possible conflicts of
in the new regulatory
framework, the ECB would favour the inclusion of comi-
tology provisions not only in Article 16, but also in Article
36. Such a general comitology-based approach would not
only help to tackle the evolving nature of conflicts of
interest and the procedures for dealing with them, but
would also facilitate
comparable working standards,
where appropriate, among the different trading formats.

supervision of

could be

financial

interest

that

11. Fourth, the new regulatory framework on trade execution.
The proposed directive, while retaining the existing dual

rigidities

classification between regulated markets and investment
firms,
introduces the operation of MTFs as a new core
ISD service, thereby allowing investment firms operating
such facilities
to be authorised and subjected to a
customised regulatory regime. Reflecting rapid tech-
nological advances
in recent years, MTFs have been
important in supporting the move away from national
structural
trading and cross-
to cross-border
border alliances, allowing a more efficient exploitation of
the benefits of the single market. The proposed inclusion
of the operation of MTFs in the list of core ISD services is
therefore welcome, as it recognises the changing nature of
financial intermediation and enables MTFs to make their
facilities and services available to users throughout the EU
and the euro area. Furthermore, the proposed directive
provides
that execute
clients' orders internally. To ensure that the interests of
clients are not jeopardised by the existence of conflicts
of interest, investment firms are subject to ‘best execution’
obligations and to client order-handling rules.

rules concerning intermediaries

Liquidity

12. There is always a trade-off between competition and
concentration in trading activity. Concentration improves
the liquidity of markets and enhances the efficiency of the
price-discovery mechanism.
attracts more
liquidity and, as a result of this cycle, the most successful
market becomes a natural monopoly. Over the years,
efficient natural monopolies of this kind have emerged at
a national level. However, there are concerns that national
monopolies may be obstacles to innovation and efficiency
in a new environment, where the single currency calls for
the move to integrated EU and euro area-wide financial
the rule on the
markets. The proposed abolition of
concentration of trades on regulated markets existing in
the current ISD, together with a new harmonised legal
framework recognising the new trading venues, will
improve competition by allowing the latter to challenge
established positions of regulated markets. The resulting
enhanced competition will support
the creation of an
efficient and integrated pan-European financial market,
which is also in the ECB's interests. It cannot be ruled
out that intensified competition between trading venues
in this new environment may lead to temporary market
fragmentation with possible negative consequences for
price
directive
addresses such concerns efficiently by increasing market
is
transparency.
transparency as
crucial
competition
regards
the
enhances overall market
in
proposed directive provides
of
through
ensure,
order

‘best execution’
increased

formation. However,

to ensure
all

rules
disclosure

the ECB notes that

execution venues

appropriate price

In this context,

In addition,

efficiency.

proposed

so that

the

to

it

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execution quality, that intermediaries have order-routing
practices that allow investors to obtain the best conditions
available in different market venues.

basis for the ‘best price’ being applied to the relevant trans-
action. As the other main barrier to such comparison, the
existence of different currencies, has been eliminated in the
euro area with the introduction of the single currency,
there is indeed a strong case for consolidating price
information at an EU or euro area level. Such consoli-
dation should first and foremost be pursued by the
private sector, ensuring full availability of such information
to all
interested parties. Public authorities could act as
catalysts by fostering collective action in the private
sector to solve any coordination problems.

is

in effect,

confined to regulated markets

13. As Section II of the explanatory memorandum also notes,
there is growing consensus amongst financial regulators
and commentators that an effective transparency regime
allows the benefits of competition between trade-execution
venues to be reaped, while limiting any adverse conse-
quences for overall market efficiency, e.g. in the form of
fragmentation. Market transparency is generally regarded
as central to both the fairness and efficiency of a market
and in particular to its liquidity and quality of price
formation. Therefore,
it would be desirable to have a
coherent
transparency regime for all asset classes that
apply across all market venues. A transparency regime
and ignores
that
‘off-exchange’ trade execution will be partial in reach and
since off-exchange trading may
suboptimal
include
to investment
trading
decisions. On this basis,
is argued that all market
it
participants should be able to factor information on such
trades or trading interests into their investment decisions
and thereby maximise the efficiency of price formation. In
order
the
to avoid such undesirable
transparency
Commission proposes to enhance market
by imposing the obligation to display publicly the bid
is willing to
and ask prices at which the market
transparency) on all
conclude
lays down reporting
trading venues. Furthermore,
trades
the prices
for
requirements
executed by the eligible entities (post-trade transparency).
In principle, the ECB welcomes these rules as advancing
the fundamental goal of allowing investors to choose the
more efficient trading venues. As a consequence, liquidity
will eventually flow to the more efficient markets, with a
consequent improvement in price formation.

(pre-trade
it
and volumes of

information relevant

consequences,

trades

the

consolidating,

14. However, the ECB notes, that in order to achieve this goal
it would also be necessary to provide the means for a full
comparison of the price terms offered by different trading
venues for the same financial instruments. This could be
extent possible,
achieved by
information on prices of
instruments at a
European level. Indeed, given progress in the field of tech-
nology, the ‘best execution’ rule can only work if investors
and intermediaries have information on the quotations of
each trading venue in which securities are traded. In a fully
integrated European market,
the best execution (best
bid/best offer) can only be EU-wide and based on
quotations available on an EU-wide basis. The consoli-
forms the
dation of

information should ensure that

to the
financial

it

the end of 2002,

in equities
for

15. Furthermore, the ECB notes that the proposed directive
limits the pre- and post-trade transparency obligations to
that are listed on regulated
transactions
markets, excluding,
in debt
transactions
instance,
securities listed on regulated markets. In this respect, it is
worth noting that at
the nominal
outstanding amount of debt securities listed on regulated
markets that were potentially eligible for Eurosystem credit
operations exceeded the market capitalisation of the EU
stock exchanges. In other words, the proposed directive
leaves a very significant asset class outside the pre- and
post-trade transparency obligations.
In addition, neither
the proposed directive nor the explanatory memorandum
explains the reasons for this limited implementation of the
pre- and post- transparency obligations. On the contrary,
Section II of the explanatory memorandum states that at
the heart of the proposed directive is an effective trans-
parency regime, which seeks to ensure that appropriate
trades and
information regarding the terms of recent
current opportunities to trade in all marketplaces, trading
facilities and other trade-execution points is made available
to market participants on an EU-wide basis (1). In line with
this declaration, Article 23 of the proposed directive refers
to all financial instruments listed in Annex I in connection
with the transparency obligations. However, Articles 25,
26, 27, 28, 41 and 42 unexpectedly limit the pre- and
post-trade transparency obligations to shares.

16. The ECB emphasises that the application of the new trans-
parency rules to debt securities as well as to shares would
make a significant contribution to the efficiency of the
price formation process for these securities and to the
preservation of market
the first
regards
issue,
the vast majority of assets
eligible for Eurosystem credit operations are debt securities
listed or quoted on a regulated market. However, these
(i.e.
traded
assets

the ECB notes that

integrity. As

alternative

frequently

are

on

(1) See explanatory memorandum, p. 13.

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transactions

amount of

takes place,

since the valuation of

non-regulated) platforms. In such cases, the best source of
price information may not be the regulated market where
the asset is listed. Defining a proper reference price source
for the eligible assets is of great importance for the Euro-
such assets and the
system,
application of risk control measures rely almost entirely
on market prices. Therefore, it is important for the Euro-
system that not only the regulated market where assets are
listed, but also the alternative trading platforms, where a
are
significant
governed by the transparency obligations, thus ensuring
proper price formation. As the Commission also notes in
the explanatory memorandum, the MTFs are now the main
organised trading venues for bond trading and accounting,
however, for only 1 % of equity trading volumes in the
EU (1). Limiting pre- and post-trade transparency obli-
gations to equity instruments would therefore necessarily
mean that the proposed transparency regime would cover
the MTFs in a very limited way. This is not fully in line
with the objectives of the proposed directive. Furthermore,
it is widely recognised that price transparency is beneficial
to market integrity. If those wishing to trade are able to
maximise their information on current bids and offers and
recent trades across a wide range of facilities where an
instrument
the
Standards for Alternative Trading Systems issued by the
Committee of European Securities Regulators
(CESR),
then this will enhance price transparency. Thus limiting
transparency rules to shares would
the application of
deny those authorities charged with detecting market
abuse the possibility to fulfil their duties as regards the
debt markets.

is traded, as stated in Standard 3 of

17. The ECB notes that according to Article 60 of

the
proposed directive, the Commission shall report to the
European Parliament
and Council on the possible
extension of the scope of the provisions concerning pre-
and post- trade transparency obligations to transactions in
classes of financial instruments other than shares no later
than four years after the entry into force of the proposed
directive. However,
the
the transparency
Commission reconsiders the scope of
rules and extends
to all
financial
instruments listed on regulated markets. If this
is not possible, the period indicated in Article 60 should
be shortened to two years.

the ECB recommends

them to debt

securities or

that

18. Fifth, the rules concerning clearing and settlement systems.
The ECB welcomes the Commission's decision not
to
address the regulation of clearing and settlement within
the proposed directive and agrees with the underlying

(1) See the box on New developments in EU financial trading on page

8 of the explanatory memorandum.

technical

and public policy

reasons as expressed in Section V.1 of the explanatory
memorandum. Indeed, the efficient clearing and settlement
of securities transactions is crucial to the orderly func-
the smooth conduct of
tioning of securities markets,
the
monetary policy operations and the stability of
financial system as a whole. Because of
the systemic
importance of operators offering such services and the
complex
considerations
involved, the regulation of these distinct types of market
functions should be addressed separately. On the other
hand, the close relation between trading and post-trading
requires
the ECB
coordinated regulation. Therefore,
recommends
the Commission to finalise an adequate
regime for clearing and settlement. The ECB is highly
interested in the current discussion on the content of a
Community programme on post-trading infrastructure and
assures the Commission of its full support in defining the
main lines of policy underlying any proposed action.

19. In view of

for

and

central

directly

investment

the rights of

the purposes of

finalising transactions

the proposed
the preceding considerations,
directive confines its treatment of clearing and settlement
firms and
to clarification of
members of and participants in regulated markets to
access, at their choice, of clearing and settlement facilities
located in other Member States. According to Article
32(1), Member States shall ensure that investment firms
from other Member States have the opportunity to
access
counterparty,
indirectly
clearing and settlement systems in their respective terri-
tories
in
financial instruments, and that access to such facilities is
subject to the same transparent and objective commercial
criteria that apply to local participants.
In particular,
Member States cannot restrict the use of those facilities
to the clearing and settlement of transactions in financial
instruments undertaken on a regulated market or an MTF
in their
respective territories. Similarly, according to
Article 32(2), Member States shall ensure that regulated
markets in their respective territories offer direct, indirect
and remote members or participants the right to designate
the system for the settlement of transactions in financial
instruments undertaken on that regulated market. The ECB
supports the view that all investment firms should have
equal opportunity to join or have access to regulated
markets
the
opinion that, regardless of the manner in which trans-
actions at present are organised in Member States,
it is
important to abolish technical and legal restrictions on
direct,
indirect and remote access to regulated markets.
In order to facilitate the finalisation of cross-border trans-
actions, the ECB also shares the view that it is appropriate
to provide for
the access to clearing and settlement
systems throughout the Community by investment firms,
including those operating MTFs,
irrespective of whether
transactions have been concluded through regulated
markets in the Member State concerned. With respect to
the access and choice of central counterparties, the ECB
has already made its views public concerning the need for
open access to ensure a level playing field for service
providers.

the Community, and shares

throughout

C 144/12

EN

Official Journal of the European Union

20.6.2003

20. The ECB shares the Commission's view that investment
firms which wish to participate directly in partner
country settlement systems should have to comply with
the relevant operational and commercial requirements for
to uphold the
membership and prudential measures
smooth and orderly functioning of financial markets, as
stated in Recital 35. The ECB understands that the term
system
‘prudential measures’ does not
internal
provider's
to
implemented by public authorities entrusted
measures
with the orderly functioning of
the financial markets.
Therefore, this should be reflected in the wording of the
proposed directive by including not only prudential
measures, but also oversight,
since the smooth and
orderly functioning of the financial markets can also be
ensured by other regulatory measures which might be in
place in Member States.

refer
risk and control measures, but

to the

for
for

inter alia,

the
settlement

to ‘agreement by the

regulated market
of

21. According to Article 32(2), the right of members of or
in a regulated market
the
to designate
participants
transactions in financial
the settlement of
system for
is
regulated market
instruments undertaken on that
competent
subject,
that
authority responsible
technical
transactions
conditions
concluded on the regulated market through a settlement
system other than that designated by the regulated market
are such as to allow the smooth and orderly functioning of
financial markets’. In line with the preceding comment, it
should be noted that competence for ensuring a smooth
and orderly functioning of financial markets might reside
with authorities other than the market authorities, such as
authorities specifically competent for the clearing and/or
settlement of
(regulated market) securities transactions,
according to the regulation of each Member State. The
wording of Article 32 should also contemplate these auth-
orities and potentially coordinate their respective roles. In
addition, instead of making the right of designation subject
to specific agreement by the competent authority/ies,
it
could be advisable to impose minimum harmonised
requirements.
and/or
respect,
competence of central banks in the smooth functioning
of securities clearing and settlement should be recognised.
The ECB understands that the Commission, when asking
CESR to advise it, will also mandate CESR to consult the
NCBs regarding the implementing measures of Article
32(4).

In this

interest

the

remote members of or participants in a domestic regulated
market. It is vital to ensure that the competent authorities
are not perceived by participants as discriminating in
favour of domestic systems where these authorities do
not agree with a particular designation, provided that
their decision is based on objective and harmonised
criteria. Once the relevant decision-making bodies have
they could
endorsed the ESCB-CESR recommendations,
become
and other
the NCBs
competent authorities.

the benchmark

for

23. Sixth,

of

and

exchange

information

any legal barrier

reporting
requirements. The ECB welcomes Article 54(6), which
to information exchange
removes
between competent authorities and the members of the
ESCB, including the NCBs and the ECB, for the purposes
of performing their respective tasks. The growing degree
of integration of financial markets within the EU and the
euro area definitely calls for increased efforts to cooperate
and exchange relevant information in a rapid and efficient
way. This should involve, in particular, the relevant super-
visory authorities on a multi-national and multi-sector
basis, as well as the NCBs.

the

for meeting

24. Finally, the ECB notes that according to Article 56 of the
proposed directive, host Member States may, for statistical
purposes, require all branches within their respective terri-
tories to report to them periodically on their activities. The
ECB would like to point out that a subgroup of investment
firms and branches are part of the ECB's reference popu-
lation
reporting
requirements, as defined in Article 1 of Council Regulation
(EC) No 2533/98 of 23 November 1998 concerning the
information by the European
collection of
Central Bank (1).
to minimise the reporting
should
burden,
implementing
check the statistical data already available,
any additional
statistics under
requirement
to collect
Article 56 of
the proposed directive. Moreover, where
statistics are collected under this Article, the ECB would
welcome an exchange of information.

the ECB recommends that authorities

In order

statistical

statistical

ECB's

25. This opinion shall be published in the Official Journal of the

European Union.

Done at Frankfurt am Main on 12 June 2003.

22. The ECB understands that the intention of Article 32(4) is
to create objective criteria for the competent authorities to
assess the designation of a particular system by indirect or

The President of the ECB

Willem F. DUISENBERG

(1) OJ L 318, 27.11.1998, p. 8.