The direct costs of clearing and settling an equity transaction in Europe are significantly higher than in the US, according to a study by Nera Consulting.
The Nera research suggests the cost of processing a typical domestic equity transaction in Europe is in the range of EUR0.35 and EUR0.8, compared to a cost per trade of EUR0.1 in the US. For cross-border trades, the cost of processing can vary from EUR0.57 to EUR35 says Nera.
The research refutes an earlier analysis by the Brussels-based Centre for European Policy Studies which had concluded that domestic equity processing costs in Europe were on a par with US markets.
Nera says that for the first time, these costs have been assessed from a 'bottom up' instead of a 'top down' perspective, giving a more accurate comparison of data and a fuller appreciation of the other costs involved in a given transaction.
The report suggests the high costs in Europe are due to a number of factors, including lower economies of scale, and cross border differences in legal and regulatory factors. The report indicates that there are substantial gains to be made by European investors if these factors can be overcome.