The EU has gone after mobile phone operators with the big guns over roaming charges, threatening legislation to force them to lower these. By contrast, Charlie McCreevy, the European Commission’s internal markets commissioner, continues to take a softly-softly line with the EU’s clearing and settlement providers on their pricing strategies and, ultimately, moves towards consolidation.
Although no discernible progress has been made since he last set these bodies a deadline, the commissioner is going out of his way to avoid lumbering the financial services industry with yet more regulation.
His latest proposal, which would require clearing and settlement houses to provide greater price transparency, is just the gentlest nudge in the right direction.
What investment banks and the end users of Europe’s clearing and settlement infrastructure would ideally like to see is the complete consolidation of clearing and settlement providers across the EU into one member-owned utility, similar to the situation in the US.
Although his proposal suggests nothing of the sort, if clearing and settlement houses were forced to be more price transparent and to increase interoperability, this could help pave the way for consolidation by addressing one of the biggest obstacles to such deals at present: valuations.
Although meaningful competition in clearing and settlement is impracticable and highly unlikely, the mere threat of it could, in time, help bring valuations back down to earth.
Although the financial services industry normally complains about regulators and legislators encroaching too much, this time it seems disappointed that the European Commission has limited itself to the cash market and has not included derivatives, a concession to exchange groups.
By trying to please everyone, McCreevy is in danger of pleasing no one at all.
