The European Commission is preparing sweeping changes to the rules governing clearing and settlement in Europe in an effort to remove competitive distortions and stimulate the introduction of transparent pricing.
The EC's proposals are expected to be unveiled by head of internal markets Charlie McCreevey tomorrow. The initiative follows the publication of a report in May that compared the cost of trading across seven different bourses and described the lack of competition in the market as "striking".
McCreevy aired his scheme at a private meeting with industry representatives a week ago and distributed a summary of proposals, a copy of which was obtained by the Financial Times.
According to the paper, McCreevy wants to create a code of practice aimed at dismantling many of the barriers to competition between exchanges, clearing houses and securities settlement systems.
The first phase of the proposed code includes measures aimed at achieving price transparency and must be in place by the end of this year, says the FT. Suppliers would have to make public the prices charged for each service including the standard volume and generally applicable conditions.
The second phase would be marked by the introduction of an interoperability protocol that would enable each stock exchange, clearing house central counter parties and central securities depositories to be able to send instructions to and from each other.
This phase, in which standards are to be set by June 30 2007, would strike at the heart of the vertically-integrated silos for trade execution and clearing operated by Deutsche Börse, Borsa Italiana and the Spanish stock exchange, which have been criticised by investors for artificially inflating prices.