By Chris Jones - 7th March 2006
Stock exchanges that continue to hinder cross-border trading through unreasonably high charges face the threat of EU intervention, the European commission has warned.
Competition commissioner Neelie Kroes and internal market chief Charlie McCreevy said they wanted to see rapid progress in opening up the EU share market.
If the industry– essentially stock exchanges – fails to come up with a rapid solution before the summer, the commission will take its own action.
“We have not yet reached any definitive view on the precise measures we would propose to remedy this situation,” the commissioners said in a joint statement.
“But changes are going to have to be made.”
The commission is concerned that the cost of cross-border share trading at some bourses can be up to six times as much as that for domestic trades.
Most share trading platforms are currently run along national lines, and mainly by monopoly companies.
Each national system has developed differently, with some run by private companies and others state operated, and interoperability is extremely limited.
Two EU-commissioned reports in 2001 and 2003 found 15 specific barriers to the creation of a single market in so-called clearing and settlement, the process of finalising the transfer of ownership of stocks and shares.
The reports said that most of these barriers could be removed through the convergence of the different national systems, and urged the companies involved to move rapidly towards this goal.
Other barriers, such as those relating to tax issues or legal issues, could only be removed through government intervention, the reports claimed. They set a two-year time frame for the removal of barriers.
But over two years since the publication of the second report, only the barriers stopping the issuing of securities – such as shares, bond or options – have been removed entirely.
Progress is also being made towards the creation of a common IT system for all European clearing and settlement operations, and towards a common set of rules on “corporate actions” such as share buybacks or stock splits.
Banks also want to see changes to the current system, arguing that the monopoly over clearing and settlements held by the bourses is keeping prices artificially high.
Last month, European banking groups called on the commission to take a more aggressive stance on clearing and settlement operations run by Deutsche Borse, Borsa Italiana and Spain’s Bolsa in particular.
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