European exchanges agree clearing reforms

European exchanges agree clearing reforms

European exchanges and clearing organisations have agreed on a code of conduct aimed at improving transparency and reducing costs for investors trading across borders.

The voluntary agreement has been thrashed out in an efort to head off the threat of legislative reform from the European Commission.

News of the deal - initially leaked to the press a week ago - was formally announced by Federation of European Securities Exchanges (FESE), the European Association of Central Counterparty Clearing Houses (Each) and the European Central Securities Depositories Association (Ecsda).

The code draws up a framework for improving transparency, enforcing interoperability standards and implementing service unbundling and account separation.

The code, which will be presented to EU Commissioner Charlie McCreevy, on 7 November, sets a phased timetable for implementation:
  • By 31 December 2006, price transparency will be in place.
  • By 30 June 2007 access and interoperability conditions will be established.
  • As of 1 January 2008, service unbundlling and accounting separation will be implemented.

The London Stock Exchange, which has longed campaigned aginst the vertical business model for exchange execution, clearing and settlement as esposed by German rival Deutsche Börse, has welcomed the initiative.

LSE chief Clara Furse, says: "Our recent initiative to introduce competitive clearing is a demonstration of our commitment to an open market architecture. We believe that customers should be given choice, and as the barriers for post-trade services are removed, the market will become more efficient. It is now vital that the provisions of the Code are effectively implemented and capable of being enforced."

She says the code not only provides a framework for action on equities, but also a model for similar initiatives in other asset classes.

Deutsche Börse says it does not expect the code to have "any material impact" on its business model, revenue or cost structure.

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