ICI Supports Efforts to Streamline Clearing and Settlement Systems Among EU Member States

Washington, DC, August 6, 2004 - The Institute supports the European Union (EU) Commission's goal of creating EU securities clearing and settlement systems that are efficient and safe and ensure a level playing field among different providers of those services.

Background
Clearing and settlement is the process that takes place after two parties have agreed to transfer securities, "over the counter", through a stock exchange, or using any other means. The objective of the process is to enable the final transfer of ownership of the securities from the seller to the buyer and the corresponding transfer of payment from the buyer to the seller. Each EU member state has developed different clearing and settlement systems.

These differences have resulted in cross-border arrangements being inefficient due to a lack of global technical standards, differing business practices, and differences between the fiscal, legal, and regulatory situations between member states, resulting in more costly, complex, and risky cross-border clearing and settlement.

In an effort to create greater pan-European efficiency, the EU Commission has adopted an approach that applies tried and trusted principles to clearing and settlement, which include access to all EU markets for all EU operators, mutual recognition by member states' of each other's rules, and full transparency allowing users to compare the quality and costs of the various services available.

ICI Position
The Institute strongly supports the goal of the EU Commission and, in a recent comment letter, points out that cross-border processing of fund units is a key issue for the asset management industry and expresses the belief that standardizing operational protocols and increasing efficiencies for fund processing could bring significant benefits to shareholders. The Institute also urges the EU Commission to address the clearance and settlement of investment fund shares separately because of the unique characteristics of investment fund capital shares.

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