Funnel vision: Would fewer CCPs and way fewer CSDs make for better EU infrastructure?

More cross-border consolidation in Europe’s financial-markets infrastructures may not solve for all the region’s growth issues, as long as company law, financial supervision etc stay national. Still, calls for change to the market structure are in the air. The Mario Draghi report last year suggested reforming Europe towards a single-CCP, single-CSD setup, and the European Commission commissioned consultants to study the “potential options for the further consolidation” in the EU. Through the decades of discussion, one suggestion has been a “funnel” with many trading venues, then fewer CCPs, then even fewer CSDs, as the trades trickle to completion. Should the US scene, with the DTCC group alone at the centre, be taken for a role model to Europe, too? What should be done, how should it be approached, and who should decide over it?

Background?

• In his high-level 2024 proposal  for the future of European competitiveness, Mario Draghi proposed “foster[ing] centralisation in clearing and settlement”: 
“An important step towards the integration of the security market in the EU would be to create a single central counterparty platform (CCP) and a single central securities depository (CSD) for all security trades However, as for smaller clearing houses, the benefits of consolidation may not be so large A practical pathway towards consolidation may also be in this case to start consolidating the largest CCPs and CSDs, and then count on their gravitational pull to attract smaller ones.”

• Our article about the EU’s 2025 study is here. 

• Our FMI market-structure session in 2024 was summed up here, with full session video.