Internal market commissioner Charlie McCreevy will today issue a warning to banks to take steps on cross-border trading or face being regulated at EU level.
In a speech to the Annual Europe-USA Investment Funds Forum in Luxembourg, Mr McCreevy will say that cross-border trading in shares remains prohibitively expensive.
"Cross-border clearing and settlement costs can still be up to six times more than those of domestic settlements. We are talking about big money. . . especially when one calculates the impact of these potential cost reductions on the economy," he will say.
Mr McCreevy calls on national regulators to "take their responsibilities and collectively put their foot on the gas".
He will also set a deadline of six months for action to be taken, saying that as far as the [ European] Commission is concerned, the "clock is ticking".
"The commission is taking a close look at the economic case for action. We will decide whether any European legislation, or other intervention, is necessary on that basis and in the light of developments in the market," Mr McCreevy will say.
Making cross-border settlements easier is one aspect of an EU goal to integrate the bloc's financial markets.
A major report carried out by the previous commission identified three barriers to competition in this area, including technical requirements and market practice, tax differences and problems causes by legal uncertainty.
The issue came to a head after the introduction of the euro, as until then institutions had been oriented to the national level.
In his speech, Mr McCreevy says he is against EU interference unless it is necessary.
An EU official said the commissioner wants feedback from the industry, particularly on whether there should be a central clearing counterparty - as opposed to just national ones.
Karel Lannoo, a finance expert at the Brussels-based Centre for European Studies, said the commission wants settlement organisations to self-regulate. That means making sure that transactions are done at a "decent price, non-local organisations have access to settlements and basic governance rules are reasonable".
