A senior official for the European Central Bank (ECB) has called for the banking and post-trade industry to solve market harmonisation challenges.
Speaking at the AFME Post-Trade Conference in London, Helmut Wacket, the ECB’s head of the market integration division, used the example of TARGET2 Securities (T2S) as a way for the market to come up with its own solutions in removing post-trade barriers.
“Many solutions to removing barriers can come from the market, as we have seen with T2S which removed five or six barriers,” said Wacket.
“We are working on harmonising collateral management to help the fluidity and mobility of collateral, but we want this to be done in conjunction with the market.”
However, Wacket said certain barriers such as tax differences and corporate actions were too difficult to remove due to different legal frameworks between countries.
AFME recently published a new report arguing post-trade reforms need to go further to remove harmonisation barriers, which include implementing an efficient method of reclaiming withholding taxes, ensuring open access and interoperability for European clearing houses, and ensure collateral management is harmonised.
Maya Augustyn, senior public affairs advisor for BNP Paribas Securities Services, agreed that regulatory intervention is needed for tax, insolvency law and reporting, but also said post-trade harmonisation can be taken up by the market.
Deutsche Boerse’s head of clients, products and core markets, Jeffery Tessler, also suggested US regulators would prefer a market-led solution to the euro clearing challenge post-Brexit. “They [CFTC] have no problem with a market-led solution,” he said.
New technologies have been identified as a potential solution for the market to overcome these post-trade barriers, particularly around corporate actions.
Yet distributed ledger technology (DLT) has previously been identified as a potential replacement to T2S as a way to produce further settlement efficiencies, much to the concern of the ECB.
“We feel DLT is not fit for the mainstream, but can work for ancillary services,” added Wacket.