The owner of Spain's national exchange will launch a central counterparty (CCP) ahead of Spanish and European regulations aimed at further loosening the grip vertically integrated exchange groups have on their domestic markets.
Bolsas y Mercados Espanoles (BME) has confirmed exclusively to TheTRADEnews.com it is presently reviewing plans to launch a CCP in the “not-too-distant” future.
BME would not be drawn into disclosing the timeframe or specifics of the project but said the plan was one of a number of “innovations and improvements” the exchange was presently undertaking.
“BME is planning to launch a CCP as part of a series of reforms at the Spanish exchange,” said Jorge Yzaguirre, director of the equity unit at BME. “We are looking to provide a very level and secure system to clear and settle trades in the market.”
Floated in 2006, BME is the holding company for the Madrid, Barcelona, Bilbao and Valencia stock exchanges, as well as the Spanish derivatives market and Iberclear, Spain's central securities depository.
Clearing and settlement arrangements have so far limited trading venue competition in Spain. But national regulatory reform in the form of new laws – Title V and Title VI (due early 2012) – is designed to make clearing and settlement easier for MTFs and other potential players.
Title V – implemented earlier this year – effectively allowed MTFs to trade and settle in Spain as over-the-counter traders. The reform modified regulations governing Iberclear and simplified settlement and registration processes for the sale and purchase of equities.
Prior to Title V, once a security was bought on an MTF, it effectively needed to obtain a stock number from Iberclear – a Referencias de Registro, or ”RR'. Foreign traders were required to print another trade through a local broker in Spain.
Transactions now subject to Title V can be settled without needing the participation of the stock exchange. The reform also removes the need for clearing houses to cross positions on the local exchange with a local broker.
However, under Title V, the settlement cycle is longer and settlement fees higher for alternate venues than for the main exchange. Title VI aims to remove these barriers and provide a level playing field.
Under regulation disclosed this month in a draft version of MiFID II, the European Commission has proposed additional measures to remove the commercial barriers to competition in the clearing of securities.
Europe will require CCPs to accept clearing of securities on a non-discriminatory and transparent basis, regardless of the trading venue on which a transaction is executed.
CCPs can only deny access under certain conditions outlined in the regulation, such as when access would “threaten the smooth or orderly functioning of markets”.