The EU Code of Conduct for Clearing and Settlement: Background, status and challenges for the securities industry

This paper attempts to sum up the major challenges for the exchange and post-trade industry that are posed by the European Code of Conduct for Clearing and Settlement. The Code was adopted by the three major associations representing the cash equity trade and post-trade industry — the Federation of European Securities Exchanges (FESE), the European Association of Central Counterparty Clearing Houses (EACH) and the European Central Securities Depositories Association (ECSDA) — and accepted by the European Commission as an alternative to legal measures at the end of 2006. The first stage of its implementation started in December 2006 and the last stage is scheduled for completion in December 2007. For a better understanding of the current tasks that need to be solved by each individual player in the industry, the paper first provides the context of the better regulation principle. It then proceeds by giving an overview of the industry and by tracing the regulatory developments that led to the proposal of a Code. Finally, the paper discusses current challenges faced by the securities industry that are associated with the implementation of the Code.