The Code and T2S - The view from Euroclear Paul Symons Head of Public Affairs, Euroclear January 2008

Euroclear’s view of T2S … l We share the ECB’s vision of an integrated European Capital Market –This drives our business model –Producing client savings of €300 mn a year l Euroclear is neither for, nor against, T2S l We are constructive … l … but questioning … l … and the pace set by the ECB means that questions need to be answered quickly …

… many complex unanswered questions l Can CSDs really downsize their systems? l Can CSDs outsource settlement? l With whom will CSDs contract? l Does direct connectivity make economic sense? l How extensive will harmonisation be? l Is the project economically feasible? l And do we believe settlement should be commoditised AND public sector owned?

Euroclear’s views of the Code … l A pragmatic and sensible alternative to regulation … –… and delivering benefits quicker than regulation ! l Transparency –All (I)CSD fees publicly available –… and conversion tables an aid to price comparability l Access and Interoperability (A&IO) –Guidelines are a public ‘rule’ book –And have been a catalyst in identifying further ‘Giovannini’ barriers l Unbundling and Accounting Segregation –Implemented by (I)CSDs –Ready to submit data to regulators when required

… also some open questions here l When should we declare the Code a success? –How long should we give the A&IO requests to deliver? l How should compliance be monitored in the long term? l Should the Code be extended? –To all equity business and all players in the market? MTFs? –To other securities and products Bonds? Derivatives? Funds? l Lessons for the future of regulation?

T2S and the Code – Common themes? l Both aim to increase competition –T2S through commoditising settlement … –The Code through making settlement competitive … ! l Both look at CSDs as “quasi-monopolies” –The Code uses traditional liberalising measures … –T2S sees settlement as a commodity and wants CSDs to compete for custody services l How realistic is this? l And what market impact will it have? –CSDs and their service offerings will change European Settlement landscape is changing extremely quickly