A new working party has been established to lead the smooth implementation in the UK of harmonized, pan-European corporate-action standards, as part of the Giovannini Group initiatives to remove the barriers preventing the development of an efficient and cost-effective clearing and settlement infrastructure in Europe for securities transactions. The group will meet for the first time on May 19, 2006.
The UK Market Implementation Group (UKMIG) aims to ensure that the UK is compliant with the new corporate-action standards based on the recommendations made by the European Credit Sector Associations (ECSA) and the European Central Securities Depositories Association (ECSDA). UKMIGs specific role will be to plan, instigate and monitor implementation in the UK of the new, pan-European standards addressing corporate-action processing including distributions, shareholder rights and company reorganisations.
The UKMIG has been set up following an analysis carried out by the ECSA and ECSDA of the different market rules and practices employed across Europe for the processing of corporate actions. The British Bankers Association (BBA) and CRESTCo (part of the Euroclear group) are the UKs representatives in these organisations, respectively.
The issues and objectives leading to this analysis were set out in two reports published in 2001 and 2003 by a European Commission appointed expert committee led by Alberto Giovannini, which identified 15 barriers preventing efficient and cost-effective cross-border clearing and settlement of securities transactions in the EU. These included, in the UK for instance, a lack of a fully electronic dividend distribution system. The UKMIG will be responsible for implementing in the UK what other countries across Europe will also be doing to remove Barrier 3 by harmonising national rules and practices relating to corporate-action processing.
Membership of UKMIG will consist of expert representatives from firms and organisations in the financial sector and will be jointly chaired by the BBA and CRESTCo. The Department of Trade and Industry, the Financial Services Authority and the Bank of England have each been invited to nominate a representative in an observer capacity.
BBA chief executive Ian Mullen said, The UK financial services industry is one of the most sophisticated in the world and is renowned for its ability to adapt quickly to change. It is essential that the UK maintains its position as a prime participant in global markets and we are pleased to be playing an instrumental role in assisting industry in harmonising standards. This will ensure that issuers, market infrastructure providers, banks and their customers all enjoy the benefits of greater efficiency through a system that is harmonised to commonly accepted pan-European standards.
Tim May, Chief Executive of CRESTCo, said, The establishment of this working party is an excellent example of how the UK market is rising to the Commissions challenge to improve the settlement infrastructure in Europe. CRESTCo and the rest of the Euroclear group are committed to delivering harmonised market rules and practices alongside platform consolidation in order to reduce cross-border settlement costs, in line with the European Commissions objectives. However, the steady progress being made to implement the new harmonised standards to a large extent can be credited to the active and constructive collaboration of our clients and other market stakeholders.