On September 22 2011 the lower house of Parliament approved a reform of the Securities Market Law relating to the securities clearing, settlement and registry system. In light of the fact that post-trading activities (ie, activities occurring after a transaction or trade and culminating in a change of ownership of the securities and their registration, thus allowing the securities to be exchanged for cash) are to be carried out against a backdrop of greater integration at EU level, the reform seeks to modernise such activities, allowing the process to be simplified and costs to be cut.

The reform of the clearing, settlement and registry system focuses on three major areas:

  • interposition of a central counterparty in post-trading services;
  • elimination of the existing mechanisms guaranteeing delivery under the remit of the Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores; and
  • replacement of the existing control system based on register references by a system based exclusively on balances, with alternative control procedures being put in place.

The amendment of the Securities Market Law marks the start of the reform process, concentrating on aspects principally related to the first area (a single, central counterparty), and leaving the other issues to be dealt with by the appropriate regulatory changes. The involvement of a central counterparty will increase flexibility and allow compatibility with other European countries, as envisaged by the TARGET2-Securities Project for a centralised European securities settlement platform. In addition, it should result in lower settlement costs and eliminate the concept of guaranteed delivery in transactions.

For further information on this topic please contact Javier Ybáñez or Luis de la Peña at Garrigues Abogados & Asesores Tributarias by telephone (+34 91 514 5200), fax (+34 51 399 2408) or email ([email protected] or [email protected]).