The research is based on interviews with senior managers of banks, trade organisations, regulatory bodies, clearing houses and exchanges, MEPs and EU officials in London, Amsterdam, Brussels, Frankfurt and Paris.

The chief conclusion of the report is that Europe's financial community cannot afford to maintain the current fragmented system of multiple clearing services providers.

A consolidated European CCP would reduce transaction costs, says the report, and would also have a positive impact on the competitiveness of trading and settlement. A single system would also allow users to switch trading venues more easily.

The study says: "The main benefits of a European CCP will come from consolidation of clearing for the biggest markets. The core of this concept, therefore, must be the bringing together of LCH.Clearnet and Eurex Clearing."

But the report acknowledges that outright consolidation of LCH.Clearnet and Eurex Clearing is unlikely as both clearing providers are owned by private companies - Euronext and Deutsche Börse respectively.

In the absence of an agreement, the authors stress that harmonisation of clearing and settlement standards and protocols is key to reducing the cost and complexity of cross-border transactions and to facilitating the development of integrated systems in future.

The European Commission said earlier this year that it had received widespread support for its plans to improve pan-European securities clearing and settlement, which include the possible introduction of legislation.

In September European Union internal market commissioner Charlie McCreevy warned the securities industry that it must do more to cut costs for cross-border EU trading or face regulation on clearing and settlement.

McCreevy said that cross-border clearing and settlement costs can still be up to six times more than those of domestic settlements and that the Commission is taking a close look at the economic case for action, which could include new legislation.

The provision of clearing services was highlighted as the biggest single obstacle in the Competition Commission's (CC) investigation into the possible takeover of the London Stock Exchange by Deutsche Börse and Euronext. The regulator gave both exchanges the go ahead to make a bid but on condition that Euronext reduces its stake in LCH.Clearnet and Deutsche Börse cuts its stake in its wholly-owned clearing services firm, Eurex Clearing.