EU says cost of share clearing still too high


The cost of clearing and settling share trades between European Union countries is still too high as attempts to boost competition fail to deliver, central bank and EU officials said on Thursday.

The European Union’s executive European Commission has forced stock exchanges, and clearing and settlement houses to sign up to a code of conduct in a bid to make trading cheaper.

More than 80 applications have been made by clearers and settlement houses to link up to each other so that market users have a choice, but none has gone live. “The code has done a good part of the job ... but on the interconnectivity, which is the critical part of the competitive model, we are still waiting for these connections to happen,” the Commission’s David Wright told a conference.

“As soon as these interconnectivity agreements happen -- and I am still optimistic they can happen -- then we can see real change in prices, quality and delivery,” said Wright, deputy head of the Commission’s internal market unit. “Can the industry deliver? That is the question,” he asked, adding that a mandatory shake-up was still an option for the Commission and EU finance ministers.

Anglo-French clearing house LCH.Clearnet was the first to apply for interconnections with peers in Italy and Germany. “We keep on telling the Commission officials what’s wrong. They say they will do something about it but so far nothing has happened,” LCH.Clearnet’s Chairman, Chris Tupker, told Reuters. “There are barriers and the barriers have to be broken down. We are concentrating on Germany and Italy. In Germany they are saying you have to be a German bank,” Tupker said.

European Central Bank Governing Council Member, Gertrude Tumpel-Gugerell, told the conference that fees were coming down in trading due to greater competition, but added: “In post-trading, it’s still very, very unsatisfactory.” In another bid to cut fees the EU’s patchwork of clearing and settlement houses which bumps up the cost of a cross border trade for investors, the ECB is pushing ahead with building T2S, a platform for settling euro zone share and bond trades.

Tumpel-Gugerell said Denmark, not part of the euro zone, has said it wants to join and talks are also continuing with other EU states not part of the single currency area. “They will come to an opinion at the end of the year,” she said. (Reuters)
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