Industry think tank the Group of 30 is calling on European clearing and settlement agencies to reform their working practices and cut costs for securities market participants investing across borders.
The group, which includes high-level representatives from private and central banks, has issued a blueprint for reforming global clearing and settlement of bonds and stocks over five to seven years, in line with software and hardware upgrade cycles. It is calling for increased scrutiny of industry utilities which fail to improve working practices.
The 20 recommendations itemised in the report centre on improvements in interoperability, risk management and governance. The group calls for all market participants to adopt ISO 15022 as a global messaging standard with XML applied as a descriptive layer.
The G30 says that consolidation among the 20 or so settlement systems in Europe is essential for market reform. Market fragmentation is identified as a critical source of inefficiency, with cross-border clearing and settlement costs eight times higher than for domestic stock movements.
The G30 argues that financial market participants pay $10 billion a year globally on clearing and settlement, while providers of such services incur annual costs of only $2.5 billion.
The publication of the report comes ahead of a European Commission investigation into EU settlement, focusing on the ownership and pricing policies of clearing and settlement agencies.
The London Stock Exchange has welcomed the G30's intervention.
Says an LSE spokesman: "Many of the G30's global recommendations in this area are badly needed in Europe, where there is huge scope for improving the efficiency, and reducing the industry cost, of the presently fragmented infrastructure."