European Commission Launches Consultation on Further Reducing Barriers to Post-Trade Services

The European Commission has launched a consultation seeking views about the current state of post-trade markets, the main trends and challenges faced by post-trade services providers and their users, the existence and scale of remaining or new barriers to post-trade services used in financial transactions, the risks associated with such barriers and the best ways to address them.

Alongside the consultation, the Commission has published the report of the European Post-Trade Forum (EPTF), an expert group established by the Commission in early 2016 to assess the evolution of the EU post-trade landscape and the progress made in removing the "Giovannini barriers" to post-trade services. The EPTF report identifies those Giovannini barriers that have been successfully addressed since 2001 but cites further barriers that have arisen due to technological and market developments in the intervening fifteen years, in particular developments in derivatives markets, securities finance activities, collateral management and post-trade reporting.

The Commission consultation seeks stakeholders' views on a wide ranging set of questions, including: the relative importance of trends in post-trade in the EU; technological advances (such as distributed ledger technology and other FinTech developments); financial stability concerns arising from the susceptibility of post-trade areas to systemic risk; the means by which EU post-trade markets could become more attractive internationally; the near and longer term strategy for EU post-trade services and the challenges the markets are likely to face.

Comments are also invited on the specific post-trade barriers highlighted by EPTF and on the ability of proposed solutions to address them. The EPTF barriers are set out in full in the EPTF Report. They include: (i) national differences in rules governing the post-trade processing of corporate actions; (ii) lack of harmonisation of information messaging standards used by clearing, settlement and reporting service providers; (iii) lack of standardisation of exchange-traded funds processes hindering the growth of ETFs in Europe; (iv) complexity of post-trade reporting; (v) unresolved open access issues for financial reference data and identifiers for market participants; (vi) unharmonized aspects of national legal treatment of risk mitigation tools (e.g. diverging implementation of Financial Collateral Directive and insolvency laws); (vii) unharmonized EU legal framework for the protection of client assets/securities; (viii) issues left unresolved by the Settlement Finality Directive e.g. delivery versus payment scenarios; (ix) unharmonized surety registration and shareholder identification rules; and (x) inefficient withholding tax procedures.

The consultation is open for comments until November 15, 2017. Consultation responses will contribute to a Commission Communication on post-trade planned for the end of 2017 and will also feed into future legislative reviews.

View the Consultation Paper.

View the Online Questionnaire.

View the EPTF report and Annex 3.