Pan-European central counterparty (CCP) EMCF has extended its product portfolio with the addition of over-the-counter (OTC) clearing services for Citi's Automated Trading Services (CATS) platform.
CATS is mainly used by sell-side firms for automated bilateral trading of equities, warrants, certificates, bonds and structured products.
“The bilateral process for clearing and settling on CATS carries with it an inherent counterparty risk,” Albert-Jan Huizing, CIO at EMCF told theTRADEnews.com. “With our service – which allows OTC trades to be cleared and sent for settlement in the same way as exchange-traded equities – the risk is mitigated.”
EMCF will have an automated link to the CATS platform and will receive OTC trades for clearing throughout the day. Once a trade has been validated, EMCF will novate the trade, making it the counterparty to each participant involved. All trades are then sent to the relevant central securities depository for settlement on a T+3 basis.
EMCF is currently only engaged with Citi to provide OTC clearing services, but appetite from other members for similar services is growing, according to Huizing.
“Our clearing members have expressed a strong interest in having CCP services for OTC trades. As well as offering them an added level of security, is would also allow them to reduce costs via netting efficiencies,” he said.
In addition to the introduction of a CCP, Citi plans to improve pricing transparency on CATS by introducing a portal that will enable users to see pre-trade price updates for the structured products offered on the platform in real time.