European Equity System Needs Re-Structuring: Report

February 15, 2001 ( - More restructuring is needed in the European Union in order for securities trading and clearing to remain competitive, according to a new report.

These conclusions, contained in a document named the Final Report by the Committee of Wise Men, call for eliminating any obstacles and impediments that make securities trading and processing consolidation difficult.

It added that while the consolidation process should be left in private hands, “if in due course it emerged that the private sector was unable to deliver an efficient pan-European clearing and settlement system?a clear public policy orientation would be needed to move forward.”

The restructuring is needed since “the present fragmentation of post-trade processing makes the capital markets of Europe unnecessarily costly and therefore less competitive,” according to an industry group.

Welcoming “Strong Direction”

Pen Kent, executive Chairman of the European Securities Forum (ESF), said he “welcomed enthusiastically” the report’s conclusions.  ESF, which represents the collective view of 24 of the largest world-wide investment organizations  comprising the major users of the clearing and settlement infrastructure in Europe, said it “welcomes this strong direction towards an efficient infrastructure for the European capital market and will strive to continue to urge the private sector to act quickly in its own interest to that end.”

ESF also said that future developments of securities trading systems make vertical ownership structures – where one entity owns stock exchanges, settlement facilities, depositories – inappropriate for a pan-European capital market.

The European Union (EU) target for the realization of the EU capital market is not later than 2005 (as proposed in The Financial Services Action Plan) or sooner (as presented in the Lamfalussy Report).

“ESF looks forward to working with the Commission and the European regulators to assist with the development of a regime that will facilitate consolidation in the clearing and settlement sector,” Kent said.

– Chuck Epstein