retail payment system is the natural complement to the introduction of the euro banknotes and coins and it is a necessary step towards the further integration of the retail payment market. the aim of the sepa project is to enable customers to make more efficient cashless payments throughout the euro area from a single account, irrespective of their location. sepa will, in particular, define the technical standards and access conditions to the market. by creating a level playing - field, sepa will ensure that participants are treated equally. this special feature concludes that, while the banking industry has made substantial progress towards a more integrated retail payment market, committing itself to introducing sepa instruments and procedures from january 2008 and to migrating a critical mass of its customer payments by end - 2010, some issues, such as transparency and interoperability, still need to be finalised. ii. 3 eurosystem activities for financial integration the report ’ s third chapter, “ eurosystem activities for financial integration ”, provides an overview of the main eurosystem activities in 2006. this chapter shows that the ecb and the whole eurosystem contribute in a number of ways to financial integration and development, building on their expertise and special nature as public institutions which are both active in the market and have intense relationships with market participants. we generally distinguish four activities in this contribution : ( i ) giving advice on the legislative and regulatory framework for the financial system and direct rule - making ; ( ii ) acting as a catalyst for private sector activities ; ( iii ) enhancing knowledge, raising awareness and monitoring the state of european financial integration ; and ( iv ) providing central bank services that also foster european financial integration. i will now provide an example of each of these four activities. with respect to the shaping of the financial system ’ s legislative and regulatory framework, i would like to mention, as an example, the eu securities clearing and settlement infrastructure. its current fragmentation represents a major obstacle to the further integration of european securities markets. greater integration of securities clearing and settlement systems will be crucial to lowering the posttrading costs of cross - border securities transactions, to exploiting the potential economies of scale and to establishing a european level playing - field. moreover, the clearing and settlement infrastructure directly affects the performance of the major tasks of the ecb, pertaining to the implementation of its monetary policy via the framework for the collateralisation of monetary policy ( and intraday credit ) operations, the safeguarding of financial stability and the promotion of the smooth operation

of payment systems. several public sector initiatives aim to achieve an efficient, safe and integrated post - trading market infrastructure in the european union. the ecb is closely involved in this work through its participation in the clearing and settlement advisory and monitoring expert group ( cesame ) and in the legal certainty group. let me also mention here – as an important development in 2006 – that, at the european commission ’ s request, the european industry associations for exchanges and post - trading infrastructures and their members signed a “ european code of conduct for clearing and settlement ” last november. the ecb also participates in the related monitoring group that is chaired by the commission. i now turn to the function that we describe as “ acting as a catalyst for private sector activities ”. by this we mean that in areas such as standard - setting and the establishment of common infrastructures, cooperation between private agents of the financial sector is as necessary as competition. however, cooperation may fail to materialise without the support of a catalyst. the ecb and the entire eurosystem can play such a role, on account of the competence and objectivity and the numerous contacts with market participants. the short - term european paper ( step ) initiative promotes the development of a pan - european short - term paper market through market players ’ voluntary compliance with a core set of standards encompassed in the step market convention. this convention was signed on 9 june 2006. since then, 32 step - compliant programmes, amounting to eur 166 billion, have been launched under the step label. the ecb has supported the step initiative since its inception in 2001. during the preparatory phase, the ecb facilitated coordination among market players, contributed to the step task force of the financial markets association aci and provided legal assistance. the eurosystem ’ s ongoing contribution to the step market focuses on two main activities. first, until june 2008, the ecb and nine of the eurosystem ’ s ncbs will provide technical assistance to the step secretariat concerning the step labelling process, whereby the ultimate responsibility for granting and withdrawing the step label fully rests with the step secretariat. second, the ecb regularly produces statistics on yields and volumes in the step market and publishes them on its website. from next week onwards, daily statistics will be made available. following the publication of these yield statistics, the step market will be accepted as a non - regulated market for collateral purposes in eurosystem credit operations. turning to research and monitoring activities, i would like