The European Code of Conduct for Clearing and Settlement: Towards more interoperability?

Abstract

The evolution of post-trading in the European single market recently got a boost from a number of initiatives that were launched to improve market infrastructures in this area. In June 2006, the European Commission initiated its plan for a voluntary Code of Conduct for Clearing and Settlement. The Commission has been supported in its push by large investment banks, concerned about the high costs of cross-border clearing and settlement. The industry Code is seen as a means of improving the effectiveness and efficiency of clearing and settlement, particularly on a cross-border basis. The ultimate aim is to create a more unified and harmonised European trade and post-trade market, the main characteristics of which are competitiveness and freedom of choice, to be realised by enhancing transparency and increasing competition. This paper will focus on the main element of the Code, ie access and interoperability, aimed at ensuring standard unilateral access between organisations and interoperability. This should enhance the ability of organisations to interconnect and should ultimately increase freedom of choice for market participants. The authors question if the effectiveness of this voluntary Code of Conduct on Clearing and Settlement in creating the well-needed level playing field is guaranteed: what are the hindrances and what are the challenges ahead for the industry?