Burgundy, a multilateral trading facility (MTF) for Nordic stocks, has added EuroCCP as its third clearing option, piling further pressure on domestic exchange Nasdaq OMX Nordic – which delayed plans for a similar initiative earlier this year – to provide interoperability.
Members of Burgundy can now opt to clear their trades through EuroCCP, SIX x-clear or the MTF’s incumbent clearer EMCF, allowing them to consolidate flows through the central counterparty (CCP) of their choice and reduce costs through netting.
"We have listened to our customers who told us they wanted to be able to choose who they clear with," said Olof Neiglick, CEO, Burgundy. "We expect interoperable clearing to push down overall clearing costs, which is great news for all equity traders operating in the Nordics."
While some market participants previously suggested interoperability was not a major concern for the Nordic region compared to the rest of Europe – primarily because Scandinavian markets only started clearing trades through CCPs in 2009 – there are signs the issue is now on the radar for local market participants.
"Our members were disappointed at the delay announced by Nasdaq OMX, but we will continue to discuss the matter with them and hope it’s just a matter of timing,” said a spokesperson for the Swedish Securities Dealers Association. “Interoperability is an important issue for the Nordic trading community, not just for the reduction of trading costs, but also in terms of the quality of service that different central counterparties offer."
Nasdaq OMX Nordic, which runs stock exchanges in Sweden, Denmark and Finland, laid out plans to introduce clearing choice from last April. However, the bourse operator postponed its plans, citing the risk of regulatory contradiction that could force members to make unnecessary changes.
“As long as the proposals relating to how interoperability requests should be handled are not finalised, there is a risk the model will be different to what is in place now,” Hans-Ole Jochumsen, president of Nasdaq OMX Nordic, told theTRADEnews.com in May. “This could mean those already offering clearing choice could be forced to make changes.”
Specifically, Jochumsen cited potential difference between principles for financial market infrastructure that were developed by the Committee on Payment and Settlement Systems and the Technical Committee of the International Organisation of Securities Commissions, and the European market infrastructure regulation, which includes the criteria national regulators should use for assessing interoperability requests.
Nasdaq OMX said it planned to make its intentions on interoperability clear by October this year.
“We remain committed to being the first primary exchange to offer full interoperability and we have maintained dialogue with SIX x-clear, EMCF and EuroCCP,” said Björn Sibbern, senior vice president, equities market, Nasdaq OMX Nordic. “However, as the venue for price formation for Nordic securities, we believe the best course of action is to wait until the regulatory landscape is clearer.”
Meanwhile, investment bank Jefferies has become an individual clearing participant of EuroCCP, meaning it is able to clear its own trades through the CCP. The addition takes the number of clearing members on EuroCCP, half of which are individual clearing members.