Brussels, 07/03/2006 (Agence Europe) - EU Internal Market Commissioner Charlie McCreevy and EU Competition Commissioner Neelie Kroes issued a final warning to the clearing and settlement industry on 7 March that the European Commission wants greater competition in the single market for clearing and settlement of securities in the EU, saying 'the present system is untenable. Changes are going to have to be made.' If the EUR 40 bn a year industry does not come up (before the summer) with tangible action to remove obstacles to the integration of national markets, the Commissioners explain in a press release that will come forward with measures based on EU competition and single market legislation. At the end of the month, the European Commission will be publishing an eagerly awaited impact study on the costs and advantages of EU legislation in this field.
What changes will industry have to make to avoid new EU legislation? A spokesperson for Charlie McCreevy said it would have to speed up work and provide a timetable. A Commission expert added that there had to be greater consolidation in industry, particularly in terms of market access and governance.
What measures does the European Commission have at its disposal? The Commission could issue new legislation on the single market, where there is a wide range of options, like a non-binding instrument, a framework directive or a directive. 'We have not yet reached any definitive view on the precise measures we would propose to remedy this situation,' explain the two Commissioners. In March 2005, the European Commission published the outcome of a second consultation exercise on clearing and settlement systems revealing that a slight majority of stakeholders favoured a directive (see EUROPE 8914).
In terms of EU competition rules, a spokesperson for Neelie Kroes said Commission could take action to deal with price rigging and abuse of dominant market positions, through anti-trust investigations, admitting that vertical 'silos' were problematic, whereby some stock markets (the Deutsche Borse, Bolsa Espanola and Borsa Italiana) control the platforms for both the electronic purchase and the electronic sale of securities and back room settlement and clearing for these markets.
In September 2005, Charlie McCreevy had denounced the high - if not “prohibitive” - cost of cross-border compensation and settlement/delivery operations, said to be “six times higher” than the cost of domestic operations (see EUROPE 9026). Published in August 2005, an external Commission study shows that consolidation of this sector has above all taken place at national level and that users cannot choose their service provider (see EUROPE 9004). In several Member States, including Spain and Italy, there is a legal obligation to use a given infrastructure. Users, including the banking sector, call for these two activities to be separated.