Internal Market Commissioner Charlie McCreevy has given the Financial Services Industry six months (until mid-March 2006) to cut the costs of trading securities between EU countries.
Clearing activities such as reporting or monitoring, risk margining, netting of trades, tax handling, and failure handling take place after the time a transaction is made. Settlement involves the delivery and payment of securities. The Commission’s objective of creating a single European market for these financial services is far from being reached. Most clearing houses still operate nationally, which causes problems in cross-border transactions.
Addressing the 14th Annual Europe-USA Investment Funds Forum in Luxembourg, Mr. McCreevy said on 13 September 2005 that there was a need for a more liquid pan-European market for securities clearing and settlement and that overall costs needed to be cut. “Cross-border trading remains expensive, sometimes prohibitively so. Cross-border clearing and settlement costs can still be up to 6 times more than those of domestic settlements.”
He made the clearest allusion so far to more regulation being passed in this field. “The Commission is taking a close look at the economic case for action. We will decide whether any European legislation, or other intervention, is necessary on that basis and in the light of developments in the market.”
The commissioner all but set a deadline for the industry to smoothe out processes and cut costs. “The next 6 months are crucial. As far as I am concerned, the clock is ticking,” he said.