The European Commission's Legal Certainty Group was set up in 2005 to explore the removal of three of the barriers to efficient clearing and settlement in the EU that were identified by the Giovannini Group.

The group proposes a harmonised legal framework within the EU as the most effective way to improve the fragmented system, rather than forcing changes to national legislation.

Among the recommendations put forward are proposals to give securities issuers the freedom to choose where their instruments are settled. Currently some countries require securities to be settled only in domestic depositories. This proposal ties in with the EC's voluntary code of conduct on clearing and settlement.

Other recommendations relate to the removal of insufficiencies in corporate actions processing, partly through the introduction of cross-border interconnectivity between conflicting models of securities holding.

Legal barriers make it much more complex to hold securities cross-border and lead to higher costs for transactions and credit, says EU internal market and services commissioner, Charlie McCreevy. In addition, they cause difficulties and uncertainty among investors when exercising their rights in corporate actions abroad.

"The Legal Certainty Group's work will help us to bring down these barriers. I particularly welcome the fact that the Group has addressed issues that could prove instrumental in making our post-trading market more competitive," says McCreevy. "Also, its contribution to preparing the way for an industry-led consolidation of the European post-trading environment will provide additional support for the Code of Conduct on Clearing and Settlement."

The Commission will analyse the proposals with a view of "taking a decision on the appropriate way forward before the end of 2008".

Read the Legal Certainty Group's recommendations here: