BATS Europe goes live with clearing choice
BATS Europe, the pan-European multilateral trading facility (MTF) owned by BATS Global Markets, has launched its interoperability service, which it claims will deliver long-term cost savings for its members.
The new preferred interoperability service will give the MTF's members the option of sending their trades to Anglo-French clearer LCH.Clearnet, Swiss central counterparty (CCP) SIX x-clear or EuroCCP, the European arm of US post-trade utility DTCC.
To opt in, trading participants on both sides of the trade must elect to use the service. If one or both counterparties do not choose to use the service, the trade will be sent to EMCF, BATS Europe's incumbent clearer, which will act as the default CCP.
Users of the service will also be able to split their flow between the three clearers in the interoperating group, for example they can use SIX x-clear for clearing Swiss stocks but LCH.Clearnet for French stocks if preferred.
BATS Europe CEO Mark Hemsley believes that take up of the service will be gradual.
“There will be a few firms that will be ready to use the service from day one, but we expect people to go live on an incremental basis over the coming months,” Hemsley told theTRADEnews.com. “All firms need to do is send a form detailing the clearers they want to use and we can arrange it overnight for them.”
He added that giving customers a choice of where they can clear trades will change the environment for CCPs, which no longer have to worry about earning their revenue from individual platforms and can instead compete on service and cost.
“If CCPs are made to compete for business, they can start to achieve economies of scale, as can brokers by consolidating their flow with one CCP,” he said.
Both EuroCCP and SIX x-clear have announced fee cuts to coincide with today's launch of the preferred interoperable service in a bid to encourage new and existing clients to consolidate their clearing volumes with one CCP.
EMCF remains reluctant to join the group of interoperating CCPs, having told theTRADEnews.com last month that it decided not to join the initiative because “there is no expectation that we or other CCPs will get access to any major European trade feed”.
Hemsley left the door open for EMCF and highlighted the opportunities the CCP could gain from joining the new service.
“We are keen for EMCF to be part of the interoperability service and would bring them on board as soon as possible,” said Hemsley. “If more participants use the interoperable service, more flow will start to move to those CCPs that are part of it. As more trading platforms take advantage of interoperability, there will be additional business to be won.”
As well as BATS Europe, EMCF currently provides clearing for MTFs Chi-X Europe, Quote MTF, Burgundy and TOM and the domestic exchanges in the Nordic region operated by Nasdaq OMX, which has said that it is also considering the preferred interoperability service model.