Towards a more integrated primary issuance market for securities in the EU: Legal and policy issues
| Author | Phoebus Athanassiou |
| Date | 01 April 2020 |
| Published date | 01 April 2020 |
| DOI | 10.1177/1023263X20904233 |
| Subject Matter | Articles |
Article
Towards a more integrated
primary issuance market for
securities in the EU: Legal
and policy issues
Phoebus Athanassiou*
Abstract
Inthewakeoftheseconddecadeofthe21stCentury, European securities markets remain
fragmented along national borders in terms of the rules, procedures and practices that
regulated markets in different Member States apply for the primary issuance and distribution
of transferable securities. This paper explores how the creation of a European Central
Securities Depository for the primary issuance and distribution of securities across the
European Union could help overcome fragmentation in the primary issuance market. We
conclude that, even if desirable, the creation of a European Central Securities Depository
could only achieve its objectives in combination with the introduction of a de minimis body
of European private securities law to complement and render its creation meaningful and
effective. It is the introduction of precisely such a body of law that would represent the
most significant (even if only indirect) contributionofaEuropeanCentralSecurities
Depository towards more harmonisation in primary issuance processes across the European
Union.
Keywords
European securities markets, Giovannini barriers, market fragmentation, primary securities
issuance, European central securities depository
* European Central Bank, Hessen, Germany
Corresponding author:
Phoebus Athanassiou, European Central Bank, 20 Sonnemannstrasse, Frankfurt am Main, Germany.
E-mail: phoebus.athanassiou@ecb.int
Maastricht Journal of European and
Comparative Law
2020, Vol. 27(2) 137–157
ªThe Author(s) 2020
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DOI: 10.1177/1023263X20904233
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1. Introduction
Although it has created opportunities for a decrease in cross-border securities transaction costs and
for greater integration in Europe’s securities markets,
1
the introduction of the euro has only
removed some of the many obstacles to cross-border investment activities in transferable securi-
ties.
2
It was only in recent years, first with the adoption of Directive 2004/39/EC (MiFID I)
3
and
4
and, more recently, with the establishment and activation
of TARGET2-Securities (T2S), the single European technical platform for securities settlement in
euro central bank money,
5
that several of the more fundamental ‘national’ obstacles to securities
markets’ integration were finally eliminated. By catering for the safe and efficient settlement of
cross-border transactions in transferable securities issued and held in any of its participating central
securities depositories (CSDs), T2S has fostered a significant degree of harmonisation in Europe’s
post-trade landscape.
6
By harmonising cross-border and domestic securities settlement practices
across its constituency, T2S has also contributed significantly towards overcoming several of the
domestic settlement barriers identified in the First and the Second Giovannini Reports
7
as impedi-
ments to the emergence of a single market for the settlement of cross-border securities trades. For
legislation in the field of post-trading, has contributed significantly to the harmonisation of
selected aspects of the securit ies settlement process. It is reca lled that fostering competitio n,
greater interoperability and better conn ectivity amongst CSDs were some of the main policy
1. There is no universal scholarly agreement on the role that the single currency has actually played in promoting securities
markets’ integration. As this article is not an economic treatise, we would refer readers to the relevant economic
literature.
2. Writing in 2005, well before TARGET2-Securities and of Regulation 909/2014/EU of the European Parliament
and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central
securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012,
[2014] OJ L 257/1, it was a rgued that, ‘[T]hese s ignificant nationa l differences in cle aring and settlemen t pro-
cedures are a result of insufficient integration. They create barriers to efficient cross-border trading, clearing and
settlement services to the extent that they impose additional risk and cost on investors who operate in more than
one national market. The additional cost that is associated with this fragmented infrastructure represents a major
limitation on the scope for cross-border securities trading, clearing and settlement business’ (H. Schmiedel and A.
Scho¨nenberger, ‘Integration of Securities Market Infrastructures in the Euro Area’, ECB Occasional Paper (2005),
https://ssrn.com/abstract¼752093, p. 33).
3. Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial
instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Par-
liament and of the Council and repealing Council Directive 93/22/EEC, [2004] OJ L 145/1.
4. Regulation No. 909/2014/EU of the European Parliament and of the Council of 23 July 2014 on improving securities
settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/
EU and Regulation (EU) No 236/2012, [2014] OJ L 257/1 (CSDR).
5. ‘T2S in operation’ was launched on 22 June 2015, with the migration to the platform of the first wave of central
securities depositories and their participants. The migration phase to T2S was completed on 18 September 2017. On 29
October 2018, the multi-currency function of T2S was activated, with the settlement of securities transactions in Danish
Krone. At the time of writing, central securities depositories from twenty EU Member States participated in T2S.
6. For an account of T2S and its legal basis, see P. Athanassiou, ‘T2 Securities: an Overview of the Eurosystem’s Aims and
Competence’, 23 Journal of International Banking Law and Regulation (2008), p. 585-594.
7. The reference is to the work of the Giovannini Group of Financial Market Experts, formed in 1996 to advise the
European Commission on issues of relevance to EU financial integration and the efficiency of European securities
markets. The First and the Second Giovannini Reports are available at: European Commission, ‘The Giovannini
Reports’, European Commission (2020), https://ec.europa.eu/info/publications/giovannini-reports_en.
138 Maastricht Journal of European and Comparative Law 27(2)
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