The establishment of a single European central counterparty service (CCP) for securities trading would prevent competition and raise costs for users, Chicago Mercantile Exchange (CME) chief executive Craig Donohue has warned.
Speaking at a financial markets conference in Zurich, Donohue said: "A directive that creates a single monopoly provider of CCP services is inconsistent with a call for competition. In fact, that proposal spells the end of competition for providing innovative and efficient clearing and settlement structures."
Donohue said the cost savings of moving to a single CCP or the creation of interoperability have not been quantified.
He also argued that a single user-owned CCP may fragment market liquidity which would widen spreads, and exchange-owned CCPs may use their monopoly position to raise costs for the user.
Donohue added: "Experience demonstrates that the conflicting interests of the exchange user/owners and the intermediary owners of certain CCPs impair their efficiency in terms of technology development and bringing new business innovations to market."
The CME currently operates as an integrated vertical silo as it owns and operates it own clearing house, but this model has been criticised by the European Commission and investment banking groups for lacking transparency and preventing competition.
However, David Hardy, chief executive of LCH.Clearnet claims that consolidation of CCPs would actually benefit users by reducing costs.
"By bringing together CCPs, overall fixed costs to financial markets could be significantly reduced. The end-point would be to have a single pan-European CCP, which most users believe to be best for the market," Hardy wrote in the Financial Times.
Earlier this week EU internal market commissioner Charlie McCreevy said that The European Commission will announce next month whether it will table legislation that would force the industry to cut costs of cross-border share trading. The Commission recently criticised the lack of competition in EU securities clearing and settlement which it says is pushing up trading costs.
In a separate move, Donohue has told reporters that the Chicago exchange "is not ruling out" the acquisition of a cash equities exchange.
Donohue said that US regulatory structures do not represent a barrier to such a move, which would make "financial sense" for the CME. Specific details of a potential tie-up were not given, although Donohue did tell reporters that the European and Asian markets were "important".
Meanwhile, Jean-Claude Trichet the head of the European Central Bank (ECB), has called for pan-European exchange Euronext to merge with Germany's Deutsche Börse rather than the New York Stock Exchange (NYSE).
Nyse said last week that it had inked a deal to acquire stock and derivatives exchange Euronext for around $10bn, ousting a rival bid by Deutsche Börse. But the German exchange has vowed to push on and work towards a combination with Euronext.
Commenting on the Euronext merger, Trichet says he favours a "euro area option". Earlier this week French president Jacques Chirac also came out in favour of a Euronext-Deutsche Börse combination.
Euronext is thought to be conducting merger talks with Borsa Italiana, a move which would give it more weight in the so-called 'merger of equals' with Nyse.