If, hypothetically, European CSDs would apply North American pricing, market participants would save €1 billion – 80 percent of current expenditure. With a study presented Wednesday, wholesale banking industry association AFME takes a stab at the “high EU settlement and custody costs charged by CSDs”.

With an average of 38 euro cents per instruction paid in settlement charges at the CSDs, investors in Europe face a 65 percent higher fee than those in North America, according to the Association for Financial Markets in Europe (AFME). The numbers were studied together with consultancy The ValueExchange, and presented in a joint report today (press release here).

“European market participants face opaque CSD fee structures and excessively high post-trade costs,” says Adam Farkas, AFME’s CEO. “It is striking to see from this study that larger CSDs processing high volumes are not necessarily cheaper. Instead, the current situation keeps costs high, erodes investor returns and makes Europe a less attractive place for both issuers and investors. Policy makers have a clear opportunity in the upcoming European Commission market integration proposals to strengthen Europe’s post-trade markets by promoting competition between CSDs, standardising fee structures, and increasing transparency.”

The list of accusation details is long: Custody fees are disproportionately high, with safekeeping often being the single largest item on the invoice. Non-core fees such as for penalties and partials can account for up to 59 percent of settlement costs. The T2S platform has not delivered predicted cost benefits, fee schedules are opaque, and benefits from high scale at the large CSDs are not passed on to users.

To amend the situation, AFME files a seven-bullet action list:
• Harmonise and standardise fee schedules.
• Transparent invoices.
• Fair treatment across participants.
• Adequate notice periods for fee-schedule changes.
• CSDs to fund system upgrades and regulatory compliance costs.
• End of “quasi-discipline” fees (such as recycling fees on settlement fails).
• Reverse billing for reporting costs.