By Anna McLauchlin - 13th February 2004
The European Commission is to seek to bring down the cost of trading on stockmarkets anywhere in the EU by tackling the practical side of buying shares.
Brussels does not plan to interfere with the actual structure of the industry, known as clearing and settlement, but will concentrate on ensuring competitive prices and easy access for investors.
"Further consolidation in clearing and settlement in the EU should mainly be market-driven, taking account of legitimate public policy concerns," states a draft document seen by Reuters.
But the commission does suggest that a new EU law will have to be created to ensure a harmonised industry.
"In order to arrive at such a liberalised environment and to ensure effective free access and the mutual recognition of systems, regulatory intervention at an EU level, through the adoption of a framework directive, will be necessary," the paper says.
There are also plans to set up an advisory and monitoring group to help harmonise clearing systems and expert groups to look at how to make national law more complementary.
As it stands, different firms across Europe handle the actual exchange of cash for shares involved in stock market trading.
Some exchanges, such as the London Stock Exchange, are establishing links with clearing systems from other member states but generally there are many local players with different rules which drives up the cost of international share processing.
The commission estimates buying shares cross-border can cost up to seven times as much as buying domestic equity because investors have to use several brokers.
As part of its Financial Services Action Plan, the commission has planned to tackle the fragmented clearing and settlement industry since 1999 but is under pressure from all players.
Deutsche Börse, which owns the clearing system through which all shares listed on the German exchange must be processed, says the commission has overestimated the cost of cross border transactions, claiming different tax regimes are the real issue.
An EU official told EUPolitix the commission is moving slowly because of the complexity and sensitivity of the issue, but a communication is due to be made public in April.
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