Speaking at a Capital Markets seminar in Madrid, Mr Cruickshank expanded his argument, first made in April 2001, that excessive clearing and settlement costs are distorting investment decisions and damaging Europe's capacity to innovate.
Welcoming the European Competition Commissioner Mario Monti's renewed efforts to identify and dismantle anti-competitive practices, Mr Cruickshank said that Monti's action is "very welcome, essential but only the beginning of the work to be done" to bring the benefits of full-scale reform.
Mr Cruickshank said: "The system for clearing and settling trades in Europe is so fragmented that it prevents exchanges from competing to provide efficient services and companies from benefiting from an integrated capital market.
"The costs of this inefficiency end up in companies' costs of capital. The situation is serious and costs EU industry around 10 basis points on the cost of capital - probably more.
"Interoperability - linking existing European clearing and settlement businesses to make cross-border investing and capital raising easier and cheaper - won't deliver enough. There are huge economies of scale to be passed on to users. Europe needs a structural solution."
In calling for reform, Mr Cruickshank said:
- EU policymakers shouldn't be distracted by claims that individual equity markets are well served by silo structures in which exchanges control clearing and settlement businesses. These structures restrict access for issuing companies and investors and protect the silos from competition. These silos are all operating at too small a scale. By controlling the whole value chain, they are able to shut out competition and hide the costs of their inefficiency.
- European clearing and settlement won't be resolved by action from either users or operators of the EU securities industry. Broker dealers pass through costs to investors and have other interests to protect. Most exchanges - with the notable exception of the London Stock Exchange - have stakes in clearing and settlement businesses that boost earnings and support their market capitalisation.
He added that many of those who had initially objected to his proposal for a well-governed monopoly provider are now beginning to realise that would be far preferable to the current structure of a series of unregulated, privately-owned monopolies.
The findings indicate that investors are becoming more comfortable receiving communication from companies over the internet. 86 per cent of those who have ever sought company information via a company's website find it very useful.
