The cost of trading and clearing of securities in the EU has been falling since 2006, although prices are higher at cross-border level, a European Commission survey has found.
The study, which does not include Malta due to its small market, also found that investors have a significant home bias. In major financial centres, 30 to 60 per cent of equity investments are in domestic securities, while retail investors do 70 to 90 per cent of their business at home.
The cost of cross-border transactions is around two to six times higher than domestic ones, the report said.
Luxembourg and Ireland buck the trend because they operate as small financial centres for much larger international markets, although there is significant cross-border trading between neighbouring countries, such as France and Spain, and Germany and the Netherlands.
Conducted by independent consultancy Oxera, the study is the result of a first data collection exercise. It collects data for 2006, establishing the baseline against which future prices, costs and volumes will be compared. In addition, the study also contains data for 2008 with regards providers of infrastructure services (exchanges, CCPs and CSDs).
The Commission said that this study also establishes the baseline as well as provides a first illustration of how certain trade and post-trade prices have evolved.
It found that central counterparties in several EU member states have helped to reduce the cost of settling and clearing transactions by 40 to 60 per cent since 2006, while central securities depositories have had a less dramatic effect.
Trading volume plays an important part in the determination of prices, the report states.
"Evidence from throughout the value chain highlights that volume is the single most important determinant of unit price. While there is significant cross-border activity, domestic activity is much larger. For example, while most infrastructures have many clients from abroad, these stand for much less volume than domestic clients. Therefore, throughout the value chain, the costs of trade and post-trade services are higher for cross-border transactions than domestic ones," the study says.
The Commission said that it hoped this study would help to assess how legislation on the internal market in financial services is functioning.
Commenting on the study, Internal Market Commissioner Charlie McCreevy said he particularly welcomed the study's findings concerning the decreases in costs for trading and clearing and, to some extent, also for settlement services since 2006.
"This confirms the positive impact on competition of the Markets in Financial Instruments Directive and the code of conduct on clearing and settlement," he said.