UPDATE 1-Clearing key to making derivatives safer - EU

* EU executive says clearing key to cutting derivatives risk

* Standardisation of derivatives contracts urged

* Plans less radical than U.S. push to exchange trading

* Industry groups say accept need for central clearing

(Adds more details, industry reaction)

BRUSSELS, July 3 (Reuters) - Derivatives pose risks on financial markets that central clearing of contracts would mitigate, the European Commission said on Friday, outlining plans that fall short of more radical U.S. steps.

EU Internal Market Commissioner, Charlie McCreevy, opened an investigation into the sector last October, a month after the collapse of Lehman Brothers, a bank heavily involved in the global $600 trillion off-exchange derivatives market.

McCreevy published his findings and policy proposals on Friday which said standardisation of contracts -- a process already underway -- is also needed, as well as the creation of a central data depository to store records of trades.

The plans stop short of more radical steps envisaged by the United States which seek to go beyond centrally clearing over-the-counter trades to shift trading onto exchanges or trading platforms where possible.