Devil in the detail on best execution(5)

But some question how effective T2S will be. Paul Symons, director and head of public affairs at Euroclear, is unsure whether T2S will be as effective as the ECB hopes.

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But some

question how effective T2S will be. Paul Symons, director and head of public

affairs at Euroclear, is unsure whether T2S will be as effective as the ECB hopes.

"We entirely support the principle behind T2S, which is attempting to

deliver an integrated settlement infrastructure for the European capital

market. But we have an awful lot of open questions about how the system will

operate and whether it will actually reduce costs in Europe,"

says Symons. "There is a big debate at the moment within Europe

about whether T2S, which is an interesting idea and an interesting vision, will

actually deliver on the benefits." The jury is still out on T2S, he adds.


has gone part of the way towards solving the fragmentation problem in Europe through acquisition. It has bought and

consolidated the settlement systems of Ireland,

the UK, France, Belgium

and the Netherlands.

It plans to deliver a single settlement platform for those countries by late

2009. "Euroclear has taken major steps towards harmonisation," says

Van Stappen. "T2S is looking at something even bigger, but it is not going

to be there for the next four to five years," he adds.

The problem

with the T2S proposal is that, as with McCreevy’s code of conduct, it will not

be in place when MiFID comes into force on 1 November. Following the completion

of the consultation period, the governing council of the ECB is expected to

make a decision early next year on whether to proceed with the development of



posed by the time lag between MiFID implementation and the introduction of the

code of conduct and T2S are played down in some quarters. The mismatch will

allow the market to get a good idea of how MiFID affects clearing and

settlement before developing solutions. "The time lag between the roll-out

of MiFID and T2S will bring the need for practical solutions, including

standards and market practices, to the fore," acknowledges Kirby at MiFID


Positive signs

Paul SymonsMiFID may well have a positive impact on the settlement

and clearing landscape. Competition and consolidation go hand-in-hand. While the

initial impact of the Directive will be to increase the number of liquidity

venues with dedicated clearing and settlement arms, it is also likely to lead

to increased pressure on prices, forcing many in the industry to come into line

with McCreevy’s code of conduct as it relates to price transparency and



decision to choose EuroCCP and Citi as its clearing and settlement partners is

welcomed by Symons at Euroclear. "It is good for Europe,"

he says. "A new entrant into the clearing and settlement space creates

competition. It is both a challenge and an opportunity. We all have to compete

with that new venue and to do so ensure we have fair and open access to any

trade feeds that EuroCCP provides Citi." Competition between settlement systems

will, over time, induce further consolidation, predicts Symons, as business

volumes move towards the most efficient settlement system.

McCreevy code of

conduct – timelines

■ By the end of 2006 a series of measures to improve

price transparency was to be in place.

Will McCreevy■ By 30 June

2007 agreement on a roadmap and conditions for ensuring effective rights of

access on a fair, transparent, non­discriminatory basis, so that the conditions

are set for implementing interoperability between exchanges/CCPs/CSDs etc as

soon as possible thereafter.

■ By 30 December 2007, there will be separate accounting

of the main clearing and settlement activities.

■ By the same date there will be price unbundling of the

main services and activities.

Source: European Commission

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