The Association for Financial Markets in Europe (AFME) has called for a “single, integrated post-trading system” in response to the European Commission’s consultation on post trade.
Responding on the final day of the commission’s public consultation on post trade in the Capital Markets Union (CMU), AFME urged for the “swift dismantling of the European Post-Trade Forum (EPTF) barriers”, as well as the “implementation of a longer-term strategy”.
The response comprehensively agrees with a report written by the EPTF, a European Commission working group in May, in which it called for the removal of the Giovanni Barriers in order to increase the global competitiveness of European capital markets.
The Giovanni Barriers were identified in 2003 as issues that prevent efficient cross-border clearing and settlement in the EU.
Since 2003, derivatives markets, securities finance activities, collateral management and post-trade reporting have become much more developed, while new products and new barriers have emerged.
This means a “semantic transposition” of the original barriers would not be possible and the new barriers will be termed the EPTF Barriers.
Regarding the three legal barriers identified in the Giovanni Reports, the EPTF report said: “Progress in removing the barriers has remained limited and the rationale for such reforms is unchanged.”
According to EPTF, significant operational barriers include fragmentation in corporate actions and general meeting processes, a lack of convergence in information messaging services, and a lack of harmonisation in exchange-traded fund processes—a point that did not appear in the original Giovanni Barriers.
AFME’s response also references a white paper it released in 2016, in which the association championed the dismantling of the remaining Giovanni Barriers as well a more in-depth strategy to ensure “safe and efficient European post trade”.
The association also highlighted the need for particular insight on issues surrounding systematic risk, harmonisation of tax processes and collateral management.
In regards to developing a longer-term strategy, AFME suggested the creation of a specialist strategy group by the European Commission in order to deliver “comprehensive European post-trade reform”.
In particular, its responses highlights the legal and regulatory implications of technological developments and to what to degree EPTF barriers should be dismantled.
Werner Frey, managing director of post trade at AFME, said: “The EPTF report and this consultation are an important milestone in much-needed European post-trade reform.
He added: “As a next step, we are very much in favour of dismantling the narrowly defined EPTF Barriers with a view to promoting the global competitiveness of European capital markets.”
“At the same time, a strategic plan for a comprehensive European post-trade reform should be developed.”
In August, following the release of the EPTF report, the commission launched a public consultation in the hope of improving post-trade services used in financial transactions, as part of the CMU Action Plan, aimed at removing barriers to post-trade market infrastructure.
The initiative, taken on by the Juncker Commission, is seeking to create more opportunities for investors, while boosting jobs, growth and investment across the EU.
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