ECB wants to see cheaper cross-border stock trades

BRUSSELS (Reuters) – The European Central Bank (ECB) said it might begin settling share and other securities trades, putting pressure on market operators to speed up moves to cut the cost of cross-border share trading. The surprise step would pit the bank against operators such as Deutsche Boerse and Euroclear which settle the bulk of share transactions in the European Union. «Conscious of the need for further integration in market infrastructures, and extracting the benefits from the implementation of the TARGET2 payment system, the Eurosystem is evaluating opportunities to provide efficient settlement services for securities transactions in central bank money,» the bank said in a statement. This would lead to the processing of both securities and cash settlements on a single platform through common procedures, it added. The ECB and the European Commission want a more unified and cheaper settlement system for cross-border share trading to reap maximum benefits for economies and investors from the single market. «The objective of this project is to allow the harmonized settlement of securities transactions in euros which are settled in central bank money,» the bank said in a statement. «The implementation of such a facility, which would be fully owned and operated by the Eurosystem (of central banks), would allow large cost savings.» Operators said more detail of the ECB’s plans was needed. «We don’t know what the ECB means by this new system,» said Bruno Rossignol, spokesman for Clearstream, Deutsche Boerse’s settlement arm, which is one of the most lucrative part of the German operator’s activities. Settlement is the final stage of swapping ownership of a stock for cash to complete a trade. The bank said a decision on the project is expected by early 2007. The bank’s plans would largely pit it against national central securities depositories such as Deutsche Boerse’s Clearstream Frankfurt operation or Euroclear’s Dutch, Belgian, British and French depository operations that settle share trades. EU Internal Market Commissioner Charlie McCreevy is due to announce shortly whether he will submit legislation to cut the cost of cross-border share trading. A European Commission spokesman had no comment on the European Central Bank’s announcement, saying McCreevy was expected to unveil his own plans this morning.