The London Stock Exchange (LSE) has revealed plans to use pan-European clearing house European Multilateral Clearing Facility (EMCF) as an additional central counterparty for its Baikal non-displayed multilateral trading facility (MTF).
EMCF, which is 22%-owned by rival stock exchange group Nasdaq OMX, will join Italian clearer Cassa di Compensazione e Garanzia (CC&G) in providing central counterparty (CCP) clearing to Baikal when it launches its non-displayed order book later this year. Baikal launched its smart order routing service at the end of June.
“The decision to provide a choice of CCPs is in line with what the London Stock Exchange offers with LCH.Clearnet and SIX x-clear, and also with what other MTFs offer,” an LSE spokesman told theTRADEnews.com. “EMCF was an obvious choice because it is an established CCP for clearing pan-European equities at the moment and has a track record of providing this service to MTFs.”
The spokesman added, “CC&G and EMCF will need to deliver interoperability between themselves as soon as is practical following the launch of the Baikal order book.”
He declined to comment on press reports that the LSE is planning to acquire a stake in EMCF.
EMCF currently clears for MTFs Chi-X Europe, BATS Europe and Nasdaq OMX Europe. It will also clear for Hungarian-based platform Quote MTF from September and Nordic MTF Burgundy from October. It has also been chosen as the launch clearer for Nasdaq OMX’s pan-Nordic CCP, which is scheduled to go live on 9 October.
The LSE spokesman said that the exchange would not rule in or rule out adding further CCPs to Baikal.
The Baikal order book will launch following the completion of customer testing, which commences in September. Following the launch, broker-provided liquidity-seeking algorithms will be added to Baikal as part of its liquidity aggregation service. In addition to linking 20 displayed and non-displayed venues across 14 European countries, the aggregation service will also connect brokers’ proprietary crossing engines.