[ M A R K E T R E V I E W | C A P I T A L M A R K E T S U N I O N ] detrimental impact on the post-trade landscape , which faces its own fragmentation problems . To unlock those opportunities for growth and to boost investor power in the region , a harmonised post-trade landscape must form the bedrock on which other initiatives can sit . Without a smooth and efficient post-trade environment , the CMU risks stagnation as fragmented systems will continue to stifle market access and growth .
“ When you look at some of the posttrade processes , there is still a significant amount of scope for harmonisation , for allowing much more effective cross-border provision for Europe to move closer together .”
BEN POTT , INTERNATIONAL HEAD OF PUBLIC POLICY AND GOVERNMENT AFFAIRS , BNY approach to the reliefs and refunds process , which are often complex , burdensome procedures that can actually serve as a deterrent for cross-border investment – particularly for individual and small investors . In some cases , the process takes years . Another pertinent example is the provision of depositary services , where there is currently no passporting service available to asset servicers in the EU . “[ This is ] close to our heart as a provider of depositary services ,” says Ben Pott , international head of public policy and government affairs at BNY . “ You cannot provide cross-border depositary services under UCITS or AIFMD – which , when you talk about a unified Capital Markets Union , is a big miss .” Insolvency laws , pension schemes , corporate actions , shareholder rights , securities laws – the list goes on . For Europe to become an attractive place for investors and issuers , the EU must tackle these regulatory divergences head on . “ It is not that Europe does not have the cash and investment potential ,” says Sam Riley , CEO of Clearstream . “ It is about market attractiveness for local and international investors .”
Harmonised post-trade as the bedrock for growth The disparate frameworks also have a
“ We have said for a long time that when you look at some of the post-trade processes , there is still a significant amount of scope for harmonisation , for allowing much more effective cross-border provision for Europe to move closer together ,” says Pott . “ Historically when you look at the integration of investment services , there is a lot that has happened on the execution side , and not as much on the post-trade side .” The Draghi report calls for a centralisation of clearing and settlement systems , with a single central counterparty platform ( CCP ) and a single central securities depositary ( CSD ) – but the acquisition and integration of 27 CSDs and 14 CCPs is an unrealistic , expensive and time-consuming task . Instead , a focus on strategic partnerships and interoperability would likely yield faster results . As Riley , points out , over 90 % of settlement activity within the EU is processed at three institutions . “ That ’ s the reality ,” he says . “ We and the two other main CSDs in Europe have already progressed in providing consistency and harmonisation across platforms and processes . That naturally leads to consolidation . “ The challenge is determining what the top priorities for capital markets harmonisation are . What can we realistically achieve ? Competition is good ; it is healthy . It drives service quality , innova-
30 Global Custodian Fall 2024