A large group of European securities market participants have written to European Union finance ministers urging them to remove restrictive national tax and legal regulations in a bid to reduce the cost of cross-border clearing and settlement, Dow Jones reports.
The letter is designed to encourage governments to make long-awaited reforms that would allow the full benefit of parallel efforts at reducing costs by stock exchanges and clearing and settlement houses to be fully realized.
The cost of clearing and settling cross-border European trades is higher than in the U.S. or within any single European country because each country has its own settlement bodies and procedures. This means users have to pay hefty fees to local custodian banks to get access to each domestic market.
Euroclear, a settlement house handling domestic and cross-border transactions, estimates that a cross-border trade in Europe costs between EUR.5 and EUR.20 (between $6.65 and $26.60) to clear and settle, compared with about EUR.35 for a domestic trade and $0.10 in the U.S.
The European Commission estimates a more efficient post-trading system could reduce transaction costs in the region by as much as 18 percent and boost E.U. economic growth by about 0.6 percent.