Brussels victory for LSE

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The Independent Online

Brussels has backed London in its long-running fight with Frankfurt over how securities deals will be settled.

Brussels has backed London in its long-running fight with Frankfurt over how securities deals will be settled.

In a consultation document, issued a few days ago, the European internal market commissioner, Fritz Bolkenstein, said he was planning to put together a directive that would free up the securities market.

The directive will "introduce comprehensive rights of access for clearing and settlement providers to all EU markets".

This is an important victory for the London Stock Exchange (LSE) in its battle with one of its main European rivals, the Deutsche Börse. The Frankfurt exchange owns its own clearing and settlement company, Clear- stream, and anyone who buys shares or bonds through the Deutsche Börse has to settle their trades using Clearstream.

In the UK, the settlement system favoured by the LSE, Crest, is run on behalf of the market by the Bank of England. But traders are not required to use Crest and can settle through a rival system such as Euroclear or even Clearstream.

Mr Bolkenstein said: "There will be no real single securities market in the EU unless we can make cross-border clearing and settlement as efficient, safe and cost-effective as at national level."

Clara Furse, the chief executive of the LSE, welcomed the move, saying it validated London's strategy. "Vertical silos are anti-competitive because you have to clear and settle the purchase of German stock through the Deutsche Börse and it is significantly more expensive," she said.

The LSE has been aggressively targeting other markets in Europe. It launched an attempt earlier this month to win a large share of the trading in Dutch stocks from Euronext, the company that owns the Paris, Amsterdam and Lisbon stock exchanges. Ms Furse said that the LSE had been invited into the market by leading traders in Dutch shares who are unhappy with the service they are getting from Euronext.

The London and Frankfurt stock exchanges planned a merger four years ago into a company called iX. However, the deal was scuppered by stockbrokers in London, and since then both of the exchanges have successfully floated on their own markets.