Opinion of the European Central Bank of 16 March 2009 at the request of the Cypriot Ministry of Finance on a draft law amending the Securities and Cyprus Stock Exchange (Central Depository and Central Securities Registry) Laws of 1996 to 2008 (CON/2009/21)
Date: 2009-03-16
Institutions: European Central Bank
Subjects: Cyprus, financial supervision, monetary policy, national law, securities, stock exchange

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 16 March 2009 

at the request of the Cypriot Ministry of Finance  

on a draft law amending the Securities and Cyprus Stock Exchange (Central Depository and 

Central Securities Registry) Laws of 1996 to 2008 

(CON/2009/21) 

Introduction and legal basis 

On 20 February 2009, the European Central Bank (ECB) received a request from the Cypriot Ministry of 

Finance  for  an  opinion  on  a  draft  law  amending  the  Securities  and  Cyprus  Stock  Exchange  (Central 

Securities Depository and Central Registry) Laws of 1996 to 2008 (hereinafter the ‘draft law’). 

The  ECB’s  competence  to  deliver  an  opinion  is  based  on  Article  105(4)  of  the  Treaty  establishing  the 

European  Community  and  on  the  fifth  indent  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 law relates to payment and settlement systems. 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. 

1.  

Purpose of the draft law 

The ECB understands that the purpose of the draft law is to accommodate specific comments of the ECB 

made in two of its previous opinions on draft legal acts of relevance to the Cyprus Stock Exchange (CSE) 
and/or  to  the  CSE’s  Central  Depository  and  Central  Securities  Registry  (CDCR)2.  In  particular,  and  in 
line  with  recommendations  previously  made  by  the  ECB3,  the  draft  law  proposes  amendments  to 

Sections 3 and 6 of the Securities and Cyprus Stock Exchange (Central Depository and Central Securities 

Registry) Laws of 1996 to 2008 (hereinafter the ‘Basic Law’), which is intended to limit the scope of the 
CSE Council’s decision-making powers to technical issues only4, thereby avoiding the risk of any undue 

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OJ L 189, 3.7.1998, p. 42. 
See  ECB  Opinion  CON/2006/9  of  22  February  2006  at  the  request  of  the  Cypriot  Ministry  of  Finance  on  a  draft  law 
amending the Cyprus Securities and Stock Exchange (Central Depository and Central Securities Registry) Laws of 1996 
to 2005 and ECB Opinion CON/2006/37 of 11 July 2006 at the request of the Cypriot Ministry of Finance on two draft 
regulatory decisions issued by the Cyprus Stock Exchange Council. 
See paragraphs 4.1 and 5.2 of ECB Opinion CON/2006/9, and paragraphs 3.3 and 3.5 of ECB Opinion CON/2006/37. 
On  the  issue  of  the  competences  of  the  CSE  Council  and  of  the  nature  of  its  rule-making  powers  see,  in  particular, 
paragraphs 1.2, 3.1 and 4.1 of ECB Opinion CON/2006/9. 

 
 
 
 
                                                 
interference with settlement finality-related issues, and to clarify the scope of the CSE’s liability vis-à-vis 

its  clients  arising  from  the  operation  of  the  CDCR  and  with  regard  to  the  correct  recording  of  stock 

exchange  data  and/or  transactions.  Subject  to  its  observations  below,  the  ECB  is  pleased  to  note  the 

consulting authority’s initiative to address expressly the abovementioned outstanding issues.  

2.  

Specific observations 

2.1   Observations on the proposed amendments to Section 6 of the Basic Law 

2.1.1  The ECB understands that the objective of the proposed amendments to Section 6 of the Basic Law 

is to remove any remaining doubts as to the extent of the liability of the CSE Council arising from 
the operation of the CDCR. At present, subject to certain exceptions5, the CSE’s liability is not the 

subject of comprehensive statutory regulation, either in the Basic Law or in the CSE Regulations. 

To the extent the proposed amendments to Section 6 would confirm that the CSE, in its capacity of 

owner and operator of the CDCR, is subject to the general principles of the law of tort in Cyprus 
(astika adikimata)6, whether by way of an action for negligence in the exercise of a statutory power 

or, alternatively, for breach of statutory duty giving rise to a private, civil cause of action, the ECB 

has no comments on the overall thrust of the proposed amendments to Section 6.  

2.2   Observations on the proposed amendments to Section 3 of the Basic Law 

2.2.1  The ECB has the following comments on Section 3 of the Basic Law, which currently provides that 

the CSE has the power to ‘establish, manage and operate’ the CDCR, as specified in the Basic Law 

and  the  Regulations  and/or  Regulatory  Decisions  issued  thereunder.  In  line  with  the  ECB’s 

previous  opinions  and  having  regard  to  the  implementation  of  the  Settlement  Finality  Directive 
(SFD)7,  Section  3  of  the  Basic  Law  would  benefit  from  clarification  to  the  effect  that  the  CSE’s 

decision-making powers relate to technical issues only, to be defined within the boundaries of the 

clearing  and  settlement  framework  laid  down  by  national  legislation.  Moreover,  and  despite  the 

fact that Sections 17A and 24 of the Basic Law already refer to the national implementation of the 
SFD8,  the  proposed  amendments  to  Section  3  do  not,  in  the  ECB’s  view,  go  far  enough  towards 

addressing  unequivocally  the  concerns  previously  expressed  by  the  ECB  in  its  opinions.  As  the 

differences between Section 3, as it currently stands, and a revised Section 3 would only be very 

slight and would require deductions to be made in order for conclusions to be drawn regarding the 

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The  only  express  references  to  liability-related  issues  are  to  be  found  in:  (i)  Section  17A  of  the  Basic  Law,  which 
excludes  the  liability  of  the  CSE’s  Director  General  vis-à-vis  any  affected  party/ies  where  the  Director  General  has 
intervened  to  correct  mistaken  entries  in  the  CDCR  Register,  provided  that  they  have  acted  in  good  faith;  and 
(ii) Regulations  16(3)  and  16(4)  of  the  Securities  and  Stock  Exchange  (Registration,  Trading  and  Settlement  of 
Dematerialised Securities)  Regulations  of  2001 to  2005,  excluding  the  liability of  the  Director or  of  the  CSE  vis-à-vis 
CSE  Members  or  third  parties  where  the  Director  has  taken  measures  (or  desisted  from  so  doing)  with  a  view  to 
completing the clearing and settlement of a transaction over listed securities or their delivery where the competent CSE 
Member has failed to fulfil its relevant obligations.    
See the Civil Wrongs Law (Cap. 148, as amended).  
Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and 
securities settlement systems, OJ L 166, 11.6.1998, p. 45. 
Settlement Finality in Payment Systems and Securities Settlement Systems Law of 2003. 

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limits to the CSE Council’s rule-making powers, the ECB would invite the consulting authority to 

reflect  more  expressly  in  the  draft  law  itself  the  objectives  conveyed  in  its  accompanying 

explanatory note.  

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

Done at Frankfurt am Main, 16 March 2009 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

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