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Time for a settlement

A unified European securities trading infrastructure finally appears to be within reach. But will the market appreciate it when it gets what it's always asked for? After all, inefficiencies present opportunities to make money. If cross-border trading gets cheaper the benefit should be passed back to the end investor. Yet banks and fund managers, under pressure to slash costs, might not be ready to hand it over.

TEMPERS ARE STARTING to fray in Europe's securities markets. A group of agent banks, led by BNP Paribas and Citibank, and calling itself Fair&Clear, is fighting for its life in the European clearing and settlement marketplace.

The group, which represents 80% of European securities settlement volumes, is hitting back at Euroclear, which is rapidly becoming a force in the market and claims it can reduce cross-border equity trading costs for investors from e30 to just e0.50, the same as a domestic trade.

Fair&Clear does not like what it is seeing. It proposes a set of principles for market consolidation that it says will "ensure fair competition, promote innovation and preserve choice for market participants".

Observers are scathing. "You could also describe it as their last attempt to prevent their potential loss of market share," says one.

Another securities services banker in London says: "There is more conflict between infrastructure providers than there ever has been and things are coming rapidly to a head." It is between these players, more than between those old symbols of national prestige the stock exchanges, that the real action is taking place.

Suddenly the back office is hitting the front page and there is an obvious reason for this.

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