Tim Reucroft
12-09-2009, 02:44 PM
The Code of Conduct for Clearing & Settlement was voluntarily subscribed to by most (if not all) market infrastructure providers in Europe. Its purpose was to encourage price transparency, interoperability and service unbundling and was in-lieu of the EU Commission imposing a Directive in this area, something that nobody seemed to want.
At the recent Thomas Murray Global Custody Forum, held in London in early December, there was agreement that the Code had been a success in driving down prices but interoperability was still an issue. Various examples cited included:
• Exchanges reducing costs (although to some extent this was driven by the MTFs created by MiFID)
• Competition between the CCPs (although some of this competition was in the domain of risk management – a development that the EU Commission took a dim view of – hence the forthcoming Directive on CCPs)
• Falling costs and improved price transparency at the CSDs (although much of this is still to come via T2S).
So the Code of Conduct for Clearing & Settlement has been at least a partial success – no need for a Directive then – at least in this space.
All this grief that we have put the infrastructure through, via the Code of Conduct, has been a complete waste of time. The cost of using infrastructure has been forced down but what has happened? The custodian banks have just got richer. Unless these cost reductions are passed onto the end user, it is a complete waste of time. The objectives are not being met.
However, all is not lost. The EU Commission said that when they went down the route of a Code of Conduct, they would apply it to infrastructure first, and then apply it elsewhere if necessary. So what we need is – a Code of Conduct for Custodians; force them to pass on the cost reductions. Watch this space.
At the recent Thomas Murray Global Custody Forum, held in London in early December, there was agreement that the Code had been a success in driving down prices but interoperability was still an issue. Various examples cited included:
• Exchanges reducing costs (although to some extent this was driven by the MTFs created by MiFID)
• Competition between the CCPs (although some of this competition was in the domain of risk management – a development that the EU Commission took a dim view of – hence the forthcoming Directive on CCPs)
• Falling costs and improved price transparency at the CSDs (although much of this is still to come via T2S).
So the Code of Conduct for Clearing & Settlement has been at least a partial success – no need for a Directive then – at least in this space.
All this grief that we have put the infrastructure through, via the Code of Conduct, has been a complete waste of time. The cost of using infrastructure has been forced down but what has happened? The custodian banks have just got richer. Unless these cost reductions are passed onto the end user, it is a complete waste of time. The objectives are not being met.
However, all is not lost. The EU Commission said that when they went down the route of a Code of Conduct, they would apply it to infrastructure first, and then apply it elsewhere if necessary. So what we need is – a Code of Conduct for Custodians; force them to pass on the cost reductions. Watch this space.