EMCF and EuroCCP are to merge as a Dutch-regulated pan-European cash equities clearing house.
The two firms announced plans to merge in March and have now agreed the terms of the sale, which will see them combine their offerings under the EuroCCP name.
Euro CCP NV will be headquartered in Amsterdam as a Dutch-regulated entity. The decision to base out of Amsterdam was largely due to the Dutch part of the business being more advanced in following regulatory trends for central counterparties (CCPs).
EuroCCP is currently headquartered in London, while EMCF is headquartered in the Netherlands. However, the Dutch entity already had cash accounts with four central banks; in the Netherlands, Sweden, Denmark and Switzerland, and direct securities accounts in six central securities depositories. As a result it was felt the group would be in a better regulatory position if it opted to be lead regulated by the Dutch authorities.
EuroCCP said it intends to combine the best aspects of each business and will use the risk-management framework and customer service functions of EuroCCP while running on EMCF's technology and operations infrastructure.
EuroCCP's current CEO, Diana Chan, will head up the new business, which will also have customer-facing functions in London and Stockholm. Jan Booji, CEO of EMCF, will become COO in the new entity.
Following the deal, Chan said: "The signing of the sale and purchase agreement is a significant step towards launching the new CCP and demonstrates market participants' desire and support for initiatives that are pro-competition and strengthen the market's infrastructure and risk mitigation while driving down costs for users."
She added that making the migration of business for customers was among the firms' top priorities and EuroCCP will be focused on making this as straightforward as possible.
By merging the two businesses, EuroCCP said its customers will benefit from settlement cost savings due to increase settlement netting and reduced inter-CCP settlements. There will also be lower cost clearing available and reduced collateral obligations due to portfolio margining, single guarantee and interoperability funds.
Customers that currently use both clearing houses will only have a single set of membership and connectivity fees and a larger, more efficient customer service, risk management and IT function.
The firms denied that a feud between the Bank of England (BoE) and the European Central Bank (ECB), the latter of which wants euro-denominated instruments to be cleared only by Eurozone domiciled clearing houses, has influenced it decision to base in the Netherlands. The BoE had taken the ECB to court over the issue, though the two parties are currently in discussions to reach an out of court settlement.
The transaction is subject to competition and regulatory approval.