Financial integration has implications for the stability of markets. Integration results in increasing interconnections and cross-border activity. A higher level of integration will therefore be beneficial for our economy, enabling investors to find profitable investment opportunities whenever and wherever they arise. It will also enhance competition among financial intermediaries and among financial infrastructures and, as a consequence, reduce the costs of intermediation. However, highly interconnected systems could also be more prone to systemic risks. To avoid those risks, integration initiatives are being undertaken which place a very strong emphasis on the safety and resilience of financial markets and infrastructures.
Let me now turn to post-trade harmonisation, the central theme of this conference. The harmonisation of market practices, rules and standards in post-trading is a necessary component of financial integration. Inefficiencies and barriers in clearing and settlement make market access difficult for investors and for issuers. The European securities market cannot be said to be fully integrated if post-trade arrangements are not harmonised, ensuring safety, full competition and the absence of barriers across national markets.
MiFID is being revised to increase investor protection and improve the functioning of EU capital markets. EMIR entered into force in summer 2012, requiring standard derivative contracts to be cleared through central counterparties and establishing stringent organisational, business conduct and prudential requirements for central counterparties. The European Commission’s proposal for a CSD Regulation improving securities settlement is under scrutiny by the EU legislators; it will enhance the legal and operational conditions for cross-border settlement in the Union in general, and a strong emphasis has been placed today on the importance of its timely adoption. I noted that the majority of the audience saw the need to adopt the CSD Regulation at the latest by the start of 2014, also with a view to allowing sufficient time for the technical standards. The representatives from the Parliament and the Commission have highlighted the importance and feasibility of this objective. Finally, another initiative is in the pipeline to harmonise the securities law legislation, establishing an EU-wide framework for the ownership of securities and increasing legal certainty in cross-border environments. Combined, the review of MiFID, the EMIR, the CSD Regulation and the securities law legislation are consistently building a harmonised legal framework for the whole securities transaction chain – from trading to clearing to settlement.
Important progress is also being made at the operational and business levels. The most notable example mentioned by many today is T2S, a project with huge potential for market integration. T2S will enable the participating CSDs to focus on value-added services while the basic settlement service is provided via the single T2S platform. T2S will thereby make it easier for business to move from one CSD to another. The actors that harmonise in T2S have a greater chance of reaping the full benefits of T2S and widening their business. Conversely, the European CSDs that do not harmonise may see the securities issued via their CSD being settled predominantly in another CSD participating in T2S.
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