Stock exchanges told to cut trading costs or face new laws

Stock exchanges told to cut trading costs or face new laws

European stock exchanges, and Deutsche Börse in particular, could face fresh legislation to cut the excessive costs of share trading, the EU internal market commissioner Charlie McCreevy warned yesterday.

The Frankfurt exchange held its annual meeting yesterday, where it tried to win back its preferred marriage partner, Euronext. At the same time, Mr McCreevy, speaking in London, said that cost reductions achieved in clearing and settlement through IT, volume growth and economies of scale "have not found their way through to users". He is threatening new laws to break up integrated trading, clearance and settlement.

His aides said his remarks, at an Investment Management Association dinner, were not aimed specifically at Deutsche Börse. But Reta Francioni, the Frankfurt exchange's chief executive, went out of his way at the annual meeting to allay EU fears he would foist its "vertical silo" of integrated trading, clearance and settlement on Euronext.

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The pan-European exchange - grouping the Paris, Amsterdam, Brussels and Lisbon bourses - held its own annual meeting in the Dutch capital on Tuesday. It rejected moves to commit to a merger with its bigger German rival, leaving its options open for a tie-up with New York, which it now favours. The NYSE has offered €8bn (£5.5bn) while Deutsche Börse's indicative offer is worth between €7.6bn and €8.6bn.

In a 49-page report posted on the European commission website, Mr McCreevy's officials calculate that reduced post-trading costs of between 7% and 18% could boost GDP by between 0.2% and 0.6%. "Given the sizeable benefits that would stem from integration/consolidation of the post-trading industry, action should be taken to eliminate the barriers that hamper these processes," they said.

Mr McCreevy said: "The benefits of a directive - if I decide to introduce one - would be dwarfed by the benefits that could flow from industry and member state actions to address the current imperfections and inefficiencies in the practices and structure of the industry."

He added that he and Neelie Kroes, the competition commissioner, would deliver their proposals in July. "We cannot sit around for ever waiting for the proverbial Godot to arrive ... It is time to turn words into action."

Earlier, Kurt Viermetz, Deutsche Börse's chairman, confirmed to shareholders at the annual meeting that Jean-François Théodore, Euronext chief executive, could be the sole CEO of the combined group until the 2008 AGM in an obvious concession to win approval for what he billed as "the best and potentially last opportunity to create a European powerhouse" among global exchanges.

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