The ECB says the objective of the move would be to allow the harmonised settlement of securities transactions in euro which are settled in central bank money. The idea would be to provide a clean interface to the unified pan-European large-value payment system Target2, leading to the processing of both securities and cash settlements on a single platform through common procedures.

The move comes amid intense market debate about governance and ownership of securities clearing and settlement systems across Europe. Market participants grumble that exchange lock-in of depositories across fragmented markets leads to excessive costs for users. The issue has recently led to a purging of top-level management at LCH.Clearnet. The merged utility, whose largest shareholder is Euronext, said goodbye to both its chairman and chief executive earlier this week following a series of failed technology projects and amid regulatory probing of its governance procedures.

The ECB initiative follows a board meeting Thursday, at which it decided to explore the creation of a new service, tentatively dubbed Target2-Securities.

States the regulator: "The implementation of such a facility, which would be fully owned and operated by the Eurosystem, would allow large cost savings as a result of the high level of technical harmonisation that this facility would entail for all market participants and would represent a major step towards a single Eurosystem interface with the market."

The Eurosystem says it will now consult central securities depositories and other market participants on the envisaged facility. A final decision on the project is expected by early 2007.