The European Commission has criticised the lack of competition in EU securities clearing and settlement in a report that compares the cost of trading across seven different bourses.
The fact-finding document, published by the EU's top anti-trust regulator, breaks down the costs of trading across different European markets. It finds that Deutsche Börse, which favours a vertically-integrated model of trading and clearing and settlement provision, is the most expensive market in Europe. Perversely, however, Borsa Italiana - another integrated vertical silo - boasts the lowest trading costs.
The Commission has been lobbied by large investment banks to take action to break-up the integrated silos in an effort to remove competitive distortions and stimulate the introduction of transparent pricing for trade execution and clearing and settlement.
In analysing the latest batch of data, the Commission describes the limited degree of competition in the market as "striking" and appears to accept that competition may be being impeded in variety of ways.
The watchdog particularly takes aim at the vertically-integrated approach, noting that this model "may result in foreclosure at all levels of the value chain and therefore lead to welfare losses. Whilst there may also be efficiencies, so far the Commission has seen no convincing evidence to substantiate this".
The document concludes by suggesting that a combination of regulatory measures, industry action and the application of competition rules should all be brought to bear in an effort to stimulate competition and lower costs for investors across Europe.
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