Page 1 Cross-Border Harmonisation in Western Europe Pointers for the AECSD Tim Reucroft Thomas Murray Moscow 5 October 2005

Page 2 Agenda Thomas Murray m Harmonisation initiatives m Consolidation initiatives m The Euroclear approach m The Scandinavian approach m The Austrian approach m Issues with CSD to CSD links m Pointers for AECSD harmonisation Agenda

Page 3 Industry Groups Giovannini CESAME G30 ISSA SWIFT ECSDA Exchange level Euronext Norex Thomas Murray Harmonisation initiatives Harmonisation Initiatives CCP Level LCH.Clearnet – Settlement Connect CSD level Euroclear NCSD Regulators CPSS/IOSCO CESR CEBS

Page 4 The Euroclear approach Thomas Murray Euroclear is being driven by the need to harmonise and consolidate. It is not based on inter-operability. It is being driven internally by the CSDs and opposed by some of the major institutions. Countries: Domestic CSDs in France, Belgium, Holland and the UK Euroclear Bank (the ICSD) ?? Portugal ?? Functions being harmonised: Settlement Custody Central banking Corporate actions (not all) Communications It is essentially a wholesale model with an institutional focus. It incorporates a CCP Consolidation Initiatives

Page 5 Thomas Murray The Scandinavian approach CSD consolidation is customer driven with a major institution being the prime driver. One objective is to service the 4 major countries for the cost of 1. Countries: Sweden, Finland, Denmark, Norway ?? Iceland, Estonia, Latvia, Lithuania ?? Functions being harmonised: Issuer services Clearing & settlement Account and asset servicing It is essentially a retail model, focused on issuers and investors rather than institutions. It does not (at this stage) incorporate a CCP. A standard non-competitive service means that NCSD can while label services through to end investors. One advantage is that all Nordic securities are dematerialised. Consolidation Initiatives

Page 6 Thomas Murray The Austrian approach At this stage it is purely acquisition. Value driven with a major institution being the prime driver. There appear to be no moves to harmonise There appear to be no moves to consolidate. Consolidation Initiatives Beware of Greek’s bearing gifts.

Page 7 Difficulty of Consolidation Thomas Murray Consolidation Initiatives

Page 8 Thomas Murray Issues with CSD to CSD links CSD to CSD links Types of links Direct/Indirect DVP or FOP One way/two way What drives the links Cross border listing Competition with agent banks Inter-operability Issues with CSD to CSD links Legal issues Counterparty risk across links Nominee accounts

Page 9 Pointers for AECSD harmonisation Thomas Murray Pointers for AECSD harmonisation What are the drivers for consolidation? Do you have any cross border trading? (Regionalisation) Do you have a single currency? (Highest liquidity in currency of choice) Do you have an expensive domestic infrastructure? (Cost reduction via cost sharing) If the answer to all of the above is No – then harmonise rather than consolidate. UES Political Legal harmonisation Accounting harmonisation