Opinion of the European Central Bank of 28 October 2005 at the request of the French Financial Markets Authority on draft amendments to its General Regulation (CON/2005/40)
Date: 2005-10-28
Institutions: European Central Bank
Subjects: France, financial instrument, national law, payment system

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 28 October 2005 

at the request of the French Financial Markets Authority  

on draft amendments to its General Regulation 

(CON/2005/40) 

1. 

On 22 September 2005 the European Central Bank (ECB) received a request from the Autorité des 

marchés  financiers  (AMF)  (French  Financial  Markets  Authority)  for  an  opinion  on  draft 

amendments to its Règlement Général (General Regulation) (hereinafter the ‘draft amendments’). 

The draft amendments will simplify the rules applicable to the transfer of ownership of financial 

instruments  admitted  to  the  operations  of  a  central  depository  or  settled  through  a  settlement 

system. 

2. 

The ECB’s competence to deliver an opinion is based on 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  amendments  relate  to 

payment  and  settlement  systems  and  rules  applicable  to  financial  institutions  insofar  as  they 

materially influence the stability of financial institutions and markets. In accordance with the first 

sentence  of  Article 17.5  of  the  Rules  of  Procedure  of  the  European  Central  Bank,  the  Governing 

Council has adopted this opinion.  

3. 

The  ECB  was  consulted  in  2004  by  the  French  Ministry  of  Economic  Affairs,  Finance  and 
Industry2 on a draft order which contained certain draft amendments to Articles L.431-2 and L.431-

3 of the Monetary and Financial Code (hereinafter the ‘Code’) concerning rules on the transfer of 
ownership of financial instruments3. Article L.431-2 of the Code provides as a principle that ‘the 

transfer of ownership of financial instruments … occurs on its entry in the purchaser’s account, on 

the date and  subject to the conditions defined by the General Regulation of the AMF’. The draft 
amendments4, on which the ECB is now consulted, will define such conditions5. 

1  
2  

3  

4  

5  

OJ L 189, 3.7.1998, p. 42. 
ECB  Opinion  CON/2004/22  of  15  June  2004  at  the  request  of  the  French  Ministry  of  Economic  Affairs,  Finance  and 
Industry on certain provisions of a draft order reforming transferable securities issued by joint-stock companies. 
Order  No  2005-303  of  31  March  2005  (Official  Journal  of  the  French  Republic  No  76,  1  April  2005)  amending 
Articles L.431-2  and  L.431-3  of  the  Code  was  ratified  by  Law  No  2005-811  of  20  July  2005  (Official  Journal  of  the 
French Republic, No 168, 21 July 2005).  
General  Regulation,  Book  V  on  market  infrastructures,  Title  VI.  This  Title  is  provisionally  entitled  ‘Transfer  of 
ownership of financial instruments - Date and conditions of the entry of financial instruments in the purchaser’s account’. 
In  its  opinion  CON/2004/22  of  15  June  2004,  the  ECB  stressed  that  ‘the  ECB  may  review  its  position  …  once  it  has 
comprehensively assessed the implementing measures contained in the AMF's General Regulation’. 

 
 
 
                                                      
4. 

The  ECB  notes  that,  under  the  draft  amendments,  the  entry  in  the  purchaser’s  account  will  take 

place  on  the  date  of  the  actual  finalisation  of  the  trade,  as  indicated  in  the  rules  governing  the 

functioning of the settlement and delivery system, when the account of the purchaser’s custodian or 
of the custodian’s agent is credited on the books of the central depository6. The ECB understands 
that, with the exception of certain situations expressly provided for in the General Regulation7, the 

date of the finalisation of the trade and, simultaneously, of the entry in the account will be three 

trading days following the date of execution of the orders. 

5. 

As  mentioned  in  its  previous  opinion,  the  ECB  welcomes  the  French  authorities’  aim  of 

simplifying the existing transfer of ownership regimes for financial instruments and the abolition of 

the  distinction  between  transactions  on  and  outside  regulated  markets  thus  avoiding  a  potential 

source  of  distortion.  It  is  fundamental  to  the  creation  and  functioning  of  a  safe,  efficient  and 

integrated EU clearing and settlement infrastructure to have clear and harmonised rules on transfer 

of  ownership,  and  in  particular  concerning  the  moment  of  transfer  of  financial  instruments  held 

with central securities depositories. Against this background, the ECB welcomes the fact that the 

draft amendments will further clarify the applicable rules in this field. In this respect, the ECB fully 

shares the view of the European Commission, which has identified the rules regarding the transfer 

of ownership of financial instruments as one of the core legal issues to be addressed by the newly 
established Legal Certainty group8.  

6. 

The  ECB  notes  that  the  objective  of  the  French  reform  is  to  ‘align  systems  of  settlement  of 

financial instruments with international standards’ and ‘to define a single regime for the transfer of 

property … by providing that the transfer of property takes place at the time of finalisation of the 
operations, i.e. in practice three days after the trade’9. The rules laid down in the draft amendments 

are in line with the draft standards proposed by the European System of Central Banks (ESCB) and 

the  Committee  of  European  Securities  Regulators  (CESR),  which  retain  T+3  settlement  as  the 

current  European  ‘minimum  standard’,  implying  that  final  settlement  should  occur  no  later  than 
T+310. 

7. 

According to the draft Article 560-5 of the General Regulation, the rules governing the functioning 

of a market or a multilateral trading facility may provide that, for certain types of transactions, the 

date on which entries are to be made in the purchasers’ accounts is ‘other than three trading days 

following  the  transaction  date’.  The  ECB  understands  that  this  provision  is  intended  to  cover 

settlement cycles shorter than three trading days. The ECB notes however that, as currently drafted, 

Article 560-5 could also cover settlement cycles longer than three trading days. It is noted in this 

6  
7  
8  

9  

10  

General Regulation, draft Article 560-1. 
General Regulation, draft Articles 560-3 to 560-8 and Article 332-65.  
Communication from the Commission to the Council and the European Parliament of 28 April 2004 entitled ‘Clearing 
and Settlement in the European Union – The way forward’, COM(2004) 312 final, p. 25. 
Explanatory report to Order No 2005-303 of 31 March 2005 addressed to the President of the French Republic (Official 
Journal of the French Republic, No 76, 1 April 2005).  
‘Standards for securities clearing and settlement in the European Union, September 2004 report’. Standard 3: Settlement 
cycles and operating times, pp. 11 and 23. 

2 

                                                      
respect that the draft ESCB/CESR standards recommend further harmonisation of settlement cycles 

across markets in order to reduce fragmentation of the EU securities markets, and an evaluation of 

whether a settlement cycle shorter than T+3 is appropriate for certain securities. The ECB therefore 

suggests amending the above provision to state that the rules governing the functioning of a market 

or  a  multilateral  trading  facility  may  provide  that,  for  certain  types  of  transactions,  the  date  on 

which entries are to be made in the purchasers’ accounts is ‘less than three trading days following 

the transaction date’. 

8. 

This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 28 October 2005. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

3