Opinion of the European Central Bank of 4 January 2006 at the request of Magyar Nemzeti Bank on a draft regulation on the general terms and conditions and operating rules of organisations providing clearing house activities (CON/2006/1)
Date: 2006-01-04
Institutions: European Central Bank
Subjects: Hungary, financial stability, financial supervision, national law, payment system, securities

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 4 January 2006 

at the request of Magyar Nemzeti Bank 

on a draft regulation on the general terms and conditions and operating rules of organisations 

providing clearing house activities 

(CON/2006/1) 

1.  On 18 October 2005 the European Central Bank (ECB) received a request from Magyar Nemzeti 

Bank for an opinion on a draft regulation on the general terms and conditions and operating rules 

of organisations providing clearing house activities (hereinafter the ‘draft regulation’). 

2. 

The ECB’s competence to deliver an opinion is based on the second, third, 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  provisions11,  as  the 

draft  regulation  contains  provisions  concerning  means  of  payment,  Magyar  Nemzeti  Bank, 

payment  and  settlement  systems  and  rules  that  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 draft regulation – in conjunction with Law CXX of 2001 on capital markets (hereinafter the 

‘Capital Markets Law’) – sets out requirements in relation to the general terms and conditions and 

operating  rules  for  organisations  providing  clearing  house  activities  that  may  include 

preconditions to  performing such activities while addressing,  in particular,  the regulation  of  the 

risk management aspects of such operating rules. 

4. 

The  draft  regulation  allows  Magyar  Nemzeti  Bank  to  introduce  requirements  in  relation  to  the 

general  terms  and  conditions  and  operating  rules  applied  by  Hungarian  securities  clearing  and 

settlement  systems  hereby  taking  into  account  the  ‘Standards  for  the  use  of  EU  securities 

settlement  systems  in  ESCB  credit  operations’  published  by  the  European  Monetary  Institute 
(EMI)  in  19982  and  the  ‘Recommendations  for  securities  settlement  systems’  published  by  the 

Committee  on  Payment  and  Settlement  Systems  of  the  central  banks  of  the  Group  of  Ten 

1  
2  

OJ L 189, 3.7.1998, p. 42. 
Available on the ECB’s website at http://www.ecb.int/mopo/pdf/implement/assets/sssstandards1998.pdf. 

 
 
 
                                                 
countries  and  the  Technical  Committee  of  the  International  Organization  of  Securities 
Commissions (hereinafter referred to as ‘CPSS-IOSCO recommendations’)3 in 2001.  

5. 

The  ECB  notes  that  the  draft  regulation  is  based  on  the  current  framework  of  KELER  Rt.  (a 

central clearing house and depositary, hereinafter referred to as ‘KELER’). KELER, as indicated 

in  the  explanatory  memorandum  provided  by  Magyar  Nemzeti  Bank  to  the  ECB,  acts  as:  (a)  a 

clearing house; (b) a central counterparty (CCP); (c) a central securities depository (CSD); (d) a 

settlement  bank  for  investment  service  providers  other  than  banks;  and  (e)  a  registrar.  In  other 

Member  States  the  different  functions  are  performed  by  different  entities  subject  to  different 

requirements. Whilst it is understood that for the sake of consistency the draft regulation uses the 

same  definitions  as  the  Capital  Markets  Law,  however,  instead  of  regulating  the  entity’s  terms 

and  conditions  as  such,  the  draft  regulation  could  clarify  the  requirements  for  the  different 

functions.  It  could  also  clarify  whether  the  fact  that  functions  involving  different  risks  are 

performed by the same entity on the same platform requires additional risk control measures 

6. 

In  this  respect  the  ECB  points  out  that,  in  its  publication  entitled  ‘Assessment  of  accession 
countries’ securities settlement systems’ in 20044, it recommended creating for KELER ‘a legal 

structure  which  prevents  any  spillover  of  risks  from  the  entity  providing  CCP  services  to  the 

entity  providing  securities  settlement  services’.  Hence,  the  draft  regulation  may  need  to  be 

amended  in the future  to address  this  recommendation,  by means inter alia of a separate set  of 

legal  provisions  governing  the  general  terms  and  conditions  (and  operating  rules)  of  CCP  and 

CSD functions, respectively. 

7. 

This distinction will also allow the identification of the standards considered relevant to assessing 

each  function’s risks.  In particular, Eurosystem user  standards will only  apply  to CSDs used in 

monetary policy operations and will not apply to CCPs or investment banks. On the other hand, 

there are two sets of CPSS-IOSCO recommendations, which will apply to CSDs (and eventually 

custodians)  and  to  CCPs.  It  is  important  to  note  that  compliance  with  CPSS-IOSCO 

recommendations  may  be  insufficient  to  fully  fulfil  future  EU  oversight  standards  since  such 

standards may be more demanding than the CPSS-IOSCO recommendations. 

8. 

The ECB notes that the following definitions in Article 2 are inconsistent with those definitions in 

the two sets of standards (Eurosystem standards and CPSS-IOSCO recommendations) with which 

the  draft  regulation  should  be  consistent:  settlement  period,  delivery  versus  payment,  usual 

market  movements,  real-time  gross  settlement  and  settlement  finality.  The  ECB  recommends 

using widely-accepted standard definitions as far as possible.  

3  
4  

Available on the website of the Bank for International Settlements at http://www.bis.org/publ/cpss46.pdf. 
Available on the ECB’s website at http://www.ecb.int/pub/pdf/other/ssseuacc-assessmenten.pdf. 

                                                 
9.  Moreover,  the  risk  management  requirements  in  the  draft  regulation,  due  to  the  latter’s  limited 

scope,  do  not  fully  address  Eurosystem  user  standards  and  the  CPSS-IOSCO  oversight 

recommendations  regarding  trade  confirmation,  governance,  risks  in  cross-border  links  and  the 

availability of adequate backup facilities. As a general comment, the ECB considers it advisable 

to  comply  with  all  the  relevant  Eurosystem  standards  and  CPSS-IOSCO  recommendations  and 

finds  the  appropriate  amendment  of  Hungarian  legislation  on  the  abovementioned  points 

desirable. 

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

Done at Frankfurt am Main, 4 January 2006. 

[ signed ] 

The President of the ECB 

Jean-Claude TRICHET