Competition and the rationalization of European securities clearing and settlement

The European securities industry, national governments, the European Central Bank and the European Commission all seek to establish a single market for the issuance and trade of financial securities across the European Union (EU). This is a key part of the development of an effective single European-wide securities market. This chapter examines the industrial organization of securities clearing and settlement, arguing that competitive forces can achieve the desired rationalization and efficiency improvements in European securities clearing and settlement, provided that steps are taken to ensure fair access to the underlying ‘book entry’ function of the central securities depositories and competing custodian banks. It argues that fair access may require accounting separation and some form of access pricing.