The report from consultancy Oxera suggests the proliferation of new venues such as Turquoise and Chi-X has increased competition and led to cost reductions for using platforms since 2006.

However, when expressed in terms of value of trading, costs have actually increased in five major centres - France, Italy, the Netherlands, Spain and the UK. Oxera says this may reflect a trend in the brokerage sector of smaller transactions as brokers split orders to reduce market impact.

Meanwhile, the new code of conduct on clearing and settlement has helped cut the cost of using central counterparties. Evidence on settlement costs is more mixed, down in some markets but up in others.

The European Central Bank is currently working on a pan-European integrated settlement system. Yesterday the ECB and the 16 national central banks of the euro area have signed a Memorandum of Understanding with 27 European central securities depositories covering obligations and responsibilities for the next stage of the Target2-Securities (T2S) project.

The report also shows cross-border transactions cost twice as much as trading in domestic securities for institutional investors in major finance centres such as the UK, Germany, France and Italy.

Commenting on the findings, Charlie McCreevy, internal market and services commissioner, EC, says: "This confirms the positive impact on competition of the Markets in Financial Instruments Directive and the Code of Conduct on clearing and settlement. I encourage market participants to continue supporting our efforts to improve transparency and carry out sound policies based on facts."

Luis Correia da Silva, MD, Oxera, adds: "The study shows that integration of markets is well under way but there is some further work to be done. The costs of cross-border transactions are still between two and six times more expensive than domestic transactions. At the same time, our analysis shows that using infrastructure providers has become cheaper, by up to 80% over two years. This reflects some significant price reductions and is what one would expect as competition increases."

Oxera will conduct a follow-up study in 2010 which will assess more precisely the extent to which price reductions have translated into lower trading and post-trading costs for institutional and retail investors.

Last month the Committee of European Securities Regulators warned further regulations may be needed to address some of the unintended consequences arising from the introduction of MiFID.

CESR says the introduction of the Directive has thrown up a new set of challenges relating to pre- and post-trade transparency, liquidity and data fragmentation, and competition between new entrants and incumbent exchanges.

You can read the report here.