4.6 Particular Remarks on Securities in the Money Market 123Settlement finality and collateral. In money markets, participants can benefit
from the Settlement Finality Directive and the Collateral Directive (see Volume
II).
Some particular legal aspects of CP. From a legal perspective, the issuing of
short-term debt securities is, as a rule, less complicated than the issuing of long-
term bonds.
Community law does not lay down any detailed substantive rules applicable
specifically to short-term securities, such as commercial paper. The absence of a
specific substantive EU regulatory regime means that the matter is left to national
legislators and authorities to address at a national level. There are different domes-
tic legal regimes in the various Member States.^203
Four main features characterise European CP markets: CP are (1) wholesale in-
struments (2) that are short-term, (3) lightly documented and (4) flexible. (1) CP
are issued in large minimum denominations and bought only by professional in-
vestors who do not need to be protected in the same manner as retail investors. (2)
Because of the short maturity of CP, investors take a short-term credit risk and
most investors hold CP to maturity. (3) CP can be lightly documented and regu-
lated because only professional investors subscribe to them and bear a short-term
credit risk. The documentation contains only a minimum of disclosure and credit
protection provisions. (4) Light documentation and light regulation contributes to
the flexibility of CP. Flexibility helps to reduce transaction and funding costs.^204
The content of the contractual documents governing the issue of CP is a matter
between the issuer and the other parties to the agreements. The parties usually
agree on a standard subset of documents. The note itself would contain traditional
basic terms of payment obligations (for the basic terms, see Volume II).^205
Some particular legal aspets of ECP. As regards ECP programmes, German is-
suers tend to use German law,^206 but English law governs most ECP pro-
grammes.^207
All the provisions which may be applicable to the borrower’s ECP issues are
agreed in advance between the borrower and the group of financial institutions
that act as “dealers”. The general terms of the issues are set out in the programme
documentation, with the commercial terms being agreed at the time of the relevant
issue.^208
ECP usually does not bear interest, but is instead issued at a discount to its re-
payment amount. Since the investors’ credit risk is short-term, there is no real
(^203) EFMLG, The Money Market: Legal Aspects of Short-term Securities, Consultation Re-
port (2 September 2002) pp 47–48.
(^204) Ibid, 44–45.
(^205) Ibid, pp 46–47: Currency, denomination, maturity, and respective definitions. Interest
calculation, floating/fixed/index. Termination events/events of default (if any). Tax. In-
structions for payment/repayment/early redemption. Form of the note/global note. Set-
tlement, issuing and clearing procedures. Governing law, place of performance and ju-
risdiction.
(^206) Ibid, p 46.
(^207) Ibid, pp 34 and 45.
(^208) Fuller G, Corporate Borrowing. Third Edition. Jordans, Bristol (2006) paragraph 4.4.