What is post-trading?
Post-trading refers to the activities that take place after an exchange of securities has been agreed upon. This includes clearing and settlement.
Clearing and settlement is the term used to describe the processes and the infrastructures required to finalise a transaction. These processes enable
- transfer of ownership of the securities from the seller to the buyer
- transfer of payment from the buyer to the seller
Efficient and safe post-trade infrastructures are a key element of a well-functioning financial market. If they don't work correctly, investors face more risks and higher costs.
Post-trading in the EU
Post-trade systems in the EU have developed nationally with different forms and different business practices. This fragmentation makes cross-border clearing and settlement more complex than it is at national level and creates costs, risks and inefficiencies for investors, institutions and issuers.
Some of the barriers to cross-border post-trading in the EU were identified over a decade ago in two reports issued by the Giovannini expert group. These reports identified 15 main causes of fragmentation and inefficiencies.
EU actions so far
Since the financial crisis, the EU has acted to remove the identified barriers by introducing
- rules to ensure that settlement systems function properly
- measures to regulate and facilitate the cross-border use of collateral
- a regulation on OTC derivatives, central counterparties and trade repositories
- stricter prudential rules for central securities depositories (CSD)
- a legislative proposal on the recovery and resolution of central counterparties
Together with the markets in financial instruments directive (MiFID), which regulates trading venues and other aspects of trade in securities, these measures establish common rules for systemically important market infrastructures.
Despite the progress achieved so far, there are still obstacles to EU post-trade systems and collateral markets reaching their full potential including
- market inefficiencies
- legal barriers
- insufficient competition
- low market confidence
- an unlevel playing field
In 2015 the Commission action plan on building a capital markets union recognised the need for more action in this area including
- reviewing the progress achieved in dismantling the Giovannini barriers
- monitoring markets to ensure that legislation keeps pace with new developments
In February 2016, the Commission established the European Post-Trade Forum (EPTF) to help to review progress in removing barriers to cross-border clearing and settlement. The EPTF builds on the work of previous groups in the area of post-trade, including
- European Post Trade Group (EPTG)
- Expert Group on Market Infrastructures (EGMI)
- Clearing and Settlement Advisory and Monitoring Expert Group (CESAME 2)
- Legal Certainty Group
- Tax Barriers Business Advisory Group (TBAG)
- Fiscal Compliance Experts' Group (FISCO)
- Monitoring Group of the Code of Conduct (MOG)
A list of the main documents produced by these groups can be found below.
In August 2017, the EPTF published its report and the Commission launched a consultation on how to further reduce barriers to post-trade services across financial markets.
Report of the European Post Trade Forum (EPTF)
Main report and annexes (May 2017)
Report of the Tax Barriers Business Advisory Group (TBAG)
Report of the TBAG (May 2013)
Report of the Expert Group on Market Infrastructures (EGMI)
Report of the EGMI (October 2011)
Reports from the Fiscal Compliance Experts' Group (FISCO)
Reports published by FISCO between 2006 and 2010
Studies of the Clearing and Settlement Advisory and Monitoring Expert Group
Studies published by the expert group between 2006 and 2007
- Directorate-General for Financial Stability, Financial Services and Capital Markets Union
Comparative survey of the Legal Certainty Group
Replies to the survey launched by the Legal Certainty Group in 2006
Reports published by the Giovannini group on cross-border clearing and settlement arrangements in the European Union (2001-2003)
European Parliament Resolution on Clearing and Settlement in the EU - 7 July 2005
Council Conclusions on Clearing and Settlement - 25 November 2004
Commission communication on clearing and settlement in the European Union - The way forward - 28 April 2004
European Parliament resolution on the Commission communication on clearing and settlement in the EU - 15 January 2003
Commission communication on clearing and settlement in the EU - Main policy issues and future challenges - 28 May 2002