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

2. 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

3. 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

4. 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

5. 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

6. 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.

7. Page 7 Difficulty of Consolidation Thomas Murray Consolidation Initiatives

8. 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

9. 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