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Brussels, |
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Financial markets infrastructure policy
The European Commission aims to strengthen the resilience of market infrastructure and create an integrated, safe, and efficient post-trade environment within the EU.
What is Post-Trading?
Post-trading involves activities that occur after securities are exchanged, primarily focusing on clearing and settlement. These processes finalize transactions by transferring ownership of securities and payments between parties. Efficient post-trade infrastructure is crucial for minimizing risks and costs in financial markets.
Post-Trading in the EU
Post-trade systems in the EU have historically developed at the national level, leading to fragmentation and inefficiencies, particularly in cross-border transactions. This fragmentation increases costs and risks for investors. Some of the barriers to cross-border post-trading in the EU were identified over a decade ago in two reports issued by the Giovannini expert group. These reports identified 15 main causes of fragmentation and inefficiencies.
EU Actions So Far
In response to the financial crisis, the EU implemented measures to address these inefficiencies, including regulations to ensure proper functioning of settlement systems (Settlement Finality Directive (SFD)), facilitate cross-border collateral use (Financial Collateral Directive) and measures on OTC derivatives, central counterparties and trade repositories, stricter prudential rules for central securities depositories (CSD) (to harmonise rules in this area the EU has adopted a Regulation on CSDs (CSDR)) and a Regulation (EU) No 2021/23 on a framework for the recovery and resolution of central counterparties (CCP recovery and resolution). These efforts have established common rules for key market infrastructures.
Current Work
Despite progress, challenges remain, such as market inefficiencies, legal barriers, insufficient competition, and low market confidence. The Commission continues to address these through ongoing initiatives, including the 2015 Capital Markets Union action plan and the establishment of the European Post-Trade Forum (EPTF) in 2016 to review progress in removing barriers to cross-border clearing and settlement.
In 2017, the EPTF published a report, leading to a Commission consultation on further reducing barriers in post-trade services across EU financial markets.
What is Post-Trading?
Post-trading involves activities that occur after securities are exchanged, primarily focusing on clearing and settlement. These processes finalize transactions by transferring ownership of securities and payments between parties. Efficient post-trade infrastructure is crucial for minimizing risks and costs in financial markets.
Post-Trading in the EU
Post-trade systems in the EU have historically developed at the national level, leading to fragmentation and inefficiencies, particularly in cross-border transactions. This fragmentation increases costs and risks for investors. Some of the barriers to cross-border post-trading in the EU were identified over a decade ago in two reports issued by the Giovannini expert group. These reports identified 15 main causes of fragmentation and inefficiencies.
EU Actions So Far
In response to the financial crisis, the EU implemented measures to address these inefficiencies, including regulations to ensure proper functioning of settlement systems (Settlement Finality Directive (SFD)), facilitate cross-border collateral use (Financial Collateral Directive) and measures on OTC derivatives, central counterparties and trade repositories, stricter prudential rules for central securities depositories (CSD) (to harmonise rules in this area the EU has adopted a Regulation on CSDs (CSDR)) and a Regulation (EU) No 2021/23 on a framework for the recovery and resolution of central counterparties (CCP recovery and resolution). These efforts have established common rules for key market infrastructures.
Current Work
Despite progress, challenges remain, such as market inefficiencies, legal barriers, insufficient competition, and low market confidence. The Commission continues to address these through ongoing initiatives, including the 2015 Capital Markets Union action plan and the establishment of the European Post-Trade Forum (EPTF) in 2016 to review progress in removing barriers to cross-border clearing and settlement.
In 2017, the EPTF published a report, leading to a Commission consultation on further reducing barriers in post-trade services across EU financial markets.
