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EPFSF Lunch discussion on « Clearing and Settlement » at the European Parliament in Brussels

on 13th October 2010________________________________________________

Notes from Vivien Levy-Garboua,

Senior Advisor at the Directorate General of BNP Paribas

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EPFSF Lunch discussion on « Clearing and Settlement » at the European Parliament in Brussels

on 13th October 2010________________________________________________

1. Exchanges are much more competitive than they used to be

need for a stable ground on which to rely. We cannot have complexity at all levels.

Hence the importance of a stable framework for post trade infrastructures.

2. Post trade = CCP’s(+TR) EMIR

CSD’s New directive « announced »for 2011

There is a need for such a directive on CSD’s

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EPFSF Lunch discussion on « Clearing and Settlement » at the European Parliament in Brussels

on 13th October 2010_____________________________________________________3. EMIR / CCP’s – EMIR goes in the right direction

CCP’s are of a systemic nature

Safety /efficiency trade off. There is no trade off – The risk part is not negociable, it can not be a « risk return » type of choice.

The Risk Management tool of a CCP is crucial. CCP’s take counterparty risk.

CCP’s should be regulated

Access to CB money intra-day / over night CCP’s should be banks

CCP’s should be linked to their monetary zone

Interoperability must not be done at the expense of the risk taken

A CCP must be able to refuse to deal with another CCP

n>2 is very different from n=2 when you speak of interoperability

There will be a need for consolidation, on a regional basis

Intragroup transactions should not be obliged to go through a CCP : when my AM works with FI its BNP vs BNP

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EPFSF Lunch discussion on « Clearing and Settlement » at the European Parliament in Brussels

on 13th October 2010_____________________________________________________4. CSD’s

Role n°1 : Notarial vote / Regalian Role / Central Banks for Securities.

1) Relation with issuers

2) Creation of dematerialized securities in its systems

3) Registration of the Securities

4) Control of the integrity : Supply = Demand in number of shares

+ Sometimes :

5) Information on the life of the share (elementary Corporate Action)

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EPFSF Lunch discussion on « Clearing and Settlement » at the European Parliament in Brussels

on 13th October 2010_____________________________________________________

4. CSD’sRole n°2 : Settlement / DVP

1) DVP in CB money – Guarantee this process

2) Enable the circulation of securities

3) Guarantee the existence of securities and cash

+ Sometimes :

4) A technical role in the lending / borrowing of securities without taking any counterparty risk. Only operational risk

A CSD should not take any liquidity risk / counterparty risk – Only operational risk.

The new Directive (i) should regulate this part which is « Public utility » / not for profit / Central Bank for Securities (ii) should define the conditions under which a CSD can develop other « non regalian » activities.