4.5 Particular Remarks on Corporate Bonds 115a limited extent at the EU level. The European securities post-trading infrastruc-
tures remain largely fragmented at a cross-border level.^135
Post-trading infrastructures comprise in particular central counterparty clearing
houses (CCPs) and securities settlement systems (SSSs). A securities transaction
can be executed either on a regulated market or over the counter (OTC). Informa-
tion on the transaction either goes directly to the SSS in which the transaction is to
be settled or is first routed to a CCP and only after CCP clearing is submitted for
settlement to the SSS.^136
Table 4.1 Post-trading Infrastructures
Trading: regulated market or OTC
Clearing: CCP
Settlement: SSSCCPs offer a range of post trading services such as becoming the only counter-
party and netting (see Volume II). In most jurisdictions, the legal concept that en-
ables a CCP to become the counterparty is either novation or open offer. Novation
means that the original contract between the buyer and seller is extinguished and
replaced by two new contracts, one between the CCP and the buyer and the other
between the CCP and the seller. In an open offer system, there should never be a
contractual relationship between the buyer and seller. If all pre-agreed conditions
are met, a CCP will automatically and immediately become the counterparty.
SSSs are provided by central securities depositories (CSDs) or international
central securities depositories (ICSDs). Both enable securities transactions to be
processed by book entry. Physical securities may be immobilised by the deposi-
tory or securities may be dematerialised so that they exist only as electronic re-
cords. In addition to safekeeping, both may provide matching, clearing and settle-
ment. CSDs were originally organised on a national basis. CSDs also perform a
notary function, that is, the registration of ownership of securities on a legal re-
cord.^137
In 2007, there were 18 CSDs and 2 ICSDs (Euroclear Bank, based in Belgium,
and Clearstream Banking Luxembourg, based in Luxembourg) which provide
SSSs for debt securities in the euro area.^138
Community law. For debt instruments, important regulatory issues include:
rules on financial information available to investors (information concerning the
issuer and the debt instrument itself); rules relating to trading and distribution; the
framework for investment in debt instruments by institutional investors; rules re-
lating to using debt securities as collateral; and rules relating to clearing and set-
tlement.
The most important measures of relevance for European debt markets include:
the Prospectus Directive; the Transparency Directive; the MiFID; the UCITS Di-
(^135) Ibid, pp 5 and 39.
(^136) Ibid, pp 38–39.
(^137) Ibid, pp 38–39.
(^138) Ibid, p 42.