Multilateral trading facility (MTF) BATS Europe plans to launch an exclusive preferred interoperable clearing program to allow trading participants the choice of a preferred clearer from three interoperating clearing counterparties (CCPs) as of late July, pending regulatory approval.
With the new service, participants can elect a preferred CCP for clearing all trades in a specific market segment on BATS Europe. The preferred CCP may be one of LCH.Clearnet, SIX x-clear or EuroCCP, pending regulatory approval and implementation of interoperability arrangements between these three CCPs. Under the new preferred clearing service, if participants on both sides of a trade have selected a preferred CCP, then the executed trade will be cleared by the designated CCP(s).
Discussions around the European markets infrastructure regulation, which will create a framework for clearing house operation, had at one point threatened to postpone agreements until 2014, but with a compromise now likely, proposals put together by four pan-European CCPs and submitted in mid-2010 for review by Dutch, UK and Swiss regulators, are gaining approval. By introducing competition into clearing CCPs will be forced to lower their fees, pushing down the overall cost of trading.
“We have been very supportive of the CCP interoperability initiative because its development is consistent with BATS Europe’s intentions of improving market structure in Europe through customer choice and competition,” said Mark Hemsley, CEO of BATS Europe. “With preferred interoperable clearing, we are a step closer to a competitive European clearing environment that encourages efficiency and innovation.”
EMCF will continue to act as the default CCP for BATS Europe. According to sources close to the matter, once EMCF completes its interoperability arrangements it too will be selectable as a preferred clearing service.
In February, BATS Global Markets entered an agreement to purchase MTF Chi-X Europe, after which it will be combined with BATS Europe to form BATS Chi-X Europe. The transaction is expected to close in Q2, pending regulatory approvals.
BATS has appointed Hemsley to head both the BATS Europe and Chi-X Europe organisations after the deal closes and, following the transfer of business anticipated this summer, the combined BATS Chi-X Europe entity.