If European firms used the EuroCCP platform to clear all trades, the industry could slash costs and save around EUR350 million a year, claims the DTCC subsidiary.
EuroCCP - the European arm of US-based DTCC - says a study based on tariffs publicly disclosed by all clearing providers found its own clearing services are the cheapest in the market.
The comparative analysis, which was conducted over the past month, found the average cost for clearing paid by financial firms was 26 eurocents, whereas EuroCCP's anticipated average cost is around 2.9 eurocents per transaction. EuroCCP says its highest cost is 6 eurocents per transaction.
"If EuroCCP were used to clear all trades in Europe today, the annual cost savings to financial institutions "would be nearly EUR350 million in 2008", says the company.
EuroCCP says the study looked at pricing data made available by various central counterparties throughout Europe under the terms of the voluntary European code of conduct for clearing and settlement.
Neil Henderson, a managing director at EuroCCP who worked on the study, says while there is disclosure of tariffs, there's no uniform reporting method - different CCPs have different pricing schemes and almost no CCPs have a single constant fee for clearing all trades.
"We did not include in the study consideration of certain additional costs that financial firms incur, such as annual membership fees, connectivity fees and the opportunity costs for losing interest on cash margin held at a CCP. EuroCCP will not keep any of the interest earned on its participants' cash margin payments, but most other CCPs in Europe do," says Henderson.
Diana Chan, chief executive officer of EuroCCP, says the voluntary code of conduct and the introduction of MiFID, have been successful in "unleashing competitive market forces and providing pricing transparency".
"Since the European authorities announced their intention to allow new entrants for trading and clearing securities, established markets and central counterparties have slashed their fee structures - and more can be expected," says Chan.
The European code of conduct was agreed by securities markets participants under the threat of legislation from the European Commission (EC), which was concerned about the high costs of share trading across European borders.
Research released earlier this year by Celent suggests that the European code will continue to drive down the cost of clearing and CCPs will reduce prices until they approach or are close to the switching cost of market participants.
But the analyst also warned that the voluntary scheme will have "limited effects" on the European post-trade infrastructure and that the majority of requests made for interoperability will not succeed.
Moves to test the new scheme - notably by LCH.Clearnet - have had mixed results and earlier this year the London clearing house refused to allow Swiss rival SIS x-clear free access to the LSE's equity business in protest at barriers it is facing itself in Europe, particularly Germany and Italy.