"The European Securities Industry. Further Evidence on the Roadmap to Integration"

The integration of the European securities market is one of the most important and ambitious steps of the making of a unified financial system, particularly since the achievement of the monetary union. The paper contributes to the debate on the integration and shows why the issue of costs and competition between different trading and post-trading systems is the key point of future integration. In particular, the analysis starts with the roadmap set by the European Commission and the evolution of the regulatory approach towards the integration of the trading and post-trading sectors. After the roadmap, in the paper we review the results of the research on the main issues related to the integration of securities markets and we comment on the present situation, with particular references to the alliances and mergers between the main actors of the trading and post-trading business. In addition, we present some original measures of the explicit costs of trading for all main European exchanges, adopting a bottom-up approach, which allows to compare the prices paid by different investors for different sizes of trades. This comparison shows that the ranking of exchanges by level of prices varies, according to the trade size taken into account. This on the one hands makes more difficult the emergence of the most efficient and on the other hand has anti-competitive effects, in particular for non domestic traders. Integration becomes therefore more difficult. To complement the analysis on trading costs, we also briefly review the debates on fragmentation of different European post-trading systems. The paper concludes with some policy implications