London Stock Exchange chairman Don Cruickshank has urged the European Commission to enforce an ownership split between exchanges and their underlying clearing and settlement systems.
In a speech delivered today at a London conference organised by the Royal Institute of International Affairs, Cruickshank also called on the EC to pursuse steps to create a single pan-European clearing and settlement organisation. This could be achieved, he suggested, by requiring central counterparties to operate on an open access basis.
The European Commission is currently investigating whether clearing and settlement structures in Europe are anti-competitive.
Welcoming the review, Crucikshank remarked: "An efficient capital market plays a vital role in assisting the efficient allocation of capital to ideas. What's at stake here is nothing less than the economic competitiveness of the European Union as a whole."
In his speech, Cruickshank argues that the European full-service model may be in breach of competition articles in the EU Treaty. "Not just Articles 81 and 82, but others," he maintains.
He says the economics of clearing and settlement point towards the best solution for Europe being a well-regulated natural monopoly. "Without that, total clearing and settlement costs across Europe are around seven times higher than they need be."
Charges for clearing and settlement should also be benchmarked against an efficient provider of such services, such as the DTCC in the US, he suggests.
Summing up, Cruickshank said: "The London Stock Exchange, with no ownership role in clearing and settlement, is well placed to lead this debate. We would much rather face tough competition for exchange services within an efficient and growing European economy than exploit market power in an inefficient and fragmented market."
Cruckshank's comments are ranged squarely at Frankfurt's Deutsche Boerse, which owns half of the German equities clearer Clearstream International, and Euronext which owns its clearing arm Clearnet.