The European Equities Post-Trading Industry: Assessing the Impact of Market and Regulatory Changes
19 February 2007
By Susanne Toft with former NERA Associate Director Dr. David Ellis
A long-standing goal of the European Commission has been the integration of Europe's post-trading industry, which provides the infrastructure for the financial markets. In 2006, the Commission took the first step toward quantifying the potential benefits that would arise from integration of the European post-trading industry, specifically focused on equity markets, by publishing a Working Document analyzing the economic impact of reducing cross-border post-trading costs in Europe. Following the Document's publication, the City of London Corporation, which provides local government services to Britain's financial and commercial district, commissioned NERA to evaluate the Document and make constructive suggestions as to how it might be refined and developed.
The resulting report suggests that in drawing on prior analyses, the Working Document did not make all the adjustments necessary to compensate for differences in data. The authors offer suggestions as to how such adjustments might be undertaken, and argue that the underlying problem in assessing the potential case for a post-trading directive is primarily the lack of appropriate data. The authors also find that it is crucial to consider the question of post-trading in the context of integration of all parts of the financial market infrastructure and how changes and consolidation of other parts of the financial market value chain can and have affected cross-border trading. The authors conclude that as the Commission embarks on the next stage of its quest to produce a more precise estimate of the economic impact of changes in the post-trading industry, it should seek country-specific and market-specific data wherever possible.
