##gis of the ecb, is responsible for the daily implementation of monetary policy in its country, as regards open market operations, standing facilities and minimum reserves. however, as i mentioned previously, some important work remains to be done before we can consider that the euro financial markets are fully integrated and that they contribute in the most efficient way to the best allocation of resources. • at the juncture between the bond and the money markets, the repo market still lacks homogeneity and harmonization. this situation derives from the complex nature of this market, in which legal and settlement issues play a prominent role. the differences in domestic legislation can prove detrimental to the development of an homogeneous repo market on a euro - wide basis and to the adoption of common market standards. as such, this issue needs to be addressed. indeed, a lot of work has been conducted on this issue by market participants - and i know that isma has been a driving force in this regard - as well as by the public authorities at the european level. to a large extent, it should find its way into the directive on collateral that the european commission is about to propose to facilitate the cross - border collateralisation technique. • as regards more specifically securities markets, the cross - border circulation and settlement of securities needs to be further enhanced. one can expect the consolidation process that is taking place among securities settlement systems ( ssss ) to improve eventually the ability of market participants to move securities efficiently at lower costs across the euro zone. • similar remarks can be made regarding stock markets. confronted with fierce competition coming from new entrants, our traditional stock exchanges are implementing major changes. the introduction of the euro has been a catalyst which added another strong incentive for the rationalization of all the existing market structures. these tremendous changes, perhaps we could even call them a revolution, have been sped up by the never ending improvements in technology. indeed, the technology revolution is transforming not only the architecture of stock markets, but also the organization of bond markets. it impacts the way intermediaries and investors conduct their business. the outcome of the changes brought about by these developments are not yet well known. this is why they certainly need to be closely monitored, not only within individual firms but also at the level of supervisory bodies. • at a moment when all activities are tending to accelerate and render location issues more acute, changes in the regulatory environment are crucial to fostering efficient financial markets. let me mention in particular the ucits ( mutual

##inancing operations or by setting up a discount window that ensures that banks with unexpected temporary requirements can refinance themselves. while markets listen to central banks, central banks also listen to markets since the price formation in markets reflects agents ’ expectations, in particular concerning inflation, and their assessment of risks ; central banks require such information to make their analyses and take their monetary policy decisions. the smooth functioning of markets and financial stability are therefore essential for the effective transmission of monetary policy. if the shape of the yield curve is evolving regardless of monetary policy decisions, if risk premia are uncorrelated with fundamentals, if market liquidity dries up, then the interest rate channel ceases to function. when this affects banks ’ funding, in particular via a freezing of the interbank market, the bank lending channel seizes up. in such circumstances, central banks must turn to non - standard measures such as direct aggressive interventions to ensure that their monetary policy decisions are effectively transmitted and that markets keep ticking over. needless to say, the recent period has seen many such incidents as well as the implementation of many non - standard measures. among the measures currently in place, some are based on “ quantitative easing ”, which involves the purchasing of securities primarily with a view to generating excess liquidity that in turn moves into all market segments and fosters a better refinancing of the economy ; others are based on “ credit easing ” and aim to restore the functioning of certain particularly disrupted market segments. seen from another angle, certain policies aim to restore the smooth functioning of the interest rate channel by directly impacting the yield curve, others aim to restore the bank lending channel by ensuring that banks can obtain funding beyond the very short - term maturities to which central banks usually confine themselves. in all events, central banks stand in for failing market participants or markets. since 2008, we have seen the fed come to the rescue of the us commercial paper market and the mortgage backed securities market ; we have seen the bank of england purchase in the space of a few months gbp 200 billion in government securities, representing around 15 % of the united kingdom ’ s gdp ; the eurosystem, for its part, has conducted massive oneyear refinancing operations with euro area banks and has kick started the covered bond market, via its eur 60 billion purchase programme. next may, it also start intervening in the government securities market. this calls for further clarification in the light of my earlier