Pan-European cash equities central counterparty (CCP) EuroCCP has announced a reduction in clearing service fees, effective from 29 July 2011.
The new fee structure, available to all EuroCCP participants, coincides with the launch of a Preferred Interoperable Clearing Service on multilateral trading facility (MTF) BATS Europe, which will allow trading firms to elect a preferred CCP to clear their trades in a specific market segment.
Under the new Preferred Interoperable Clearing Service, if trading firms on both sides of a trade have selected a preferred CCP, one of EuroCCP, LCH.Clearnet or SIX x-clear, then each side will be cleared by the respective CCP the firm has chosen. If either of the sides has not selected a preferred CCP, then the incumbent clearer, EMCF, will be used.
EuroCCP's new tariff is €0.03 cents per side for the first 100,000 sides, then €0.01 cent per side for further sides up to 230,000, above which there is no further charge. This translates into an actual fee cap of €4,300 for EuroCCP customers trading an average daily volume of over 230,000 sides. Previously, EuroCCP's fee structure charged €0.03 cents per side up to 100,000 sides, €0.01 per side for further sides up to 500,000 and €0.002 cents per side for volumes over 500,000.
The revised fee structure will provide benefits to customers that concentrate volume with EuroCCP across the multiple trading platforms, according to Andrew Simpson, the firm's head of business development.
“If you are clearing 400,000 sides a day, the EuroCCP blended rate takes you down to one euro cent per side,” he said. “Previously a broker trading pan-European stock would have had to put through more than 900,000 sides a day to hit that rate.”
Chi-X Europe is expected to adopt the Preferred Interoperable Clearing Service if its acquisition by BATS Global Markets – currently subject to approval by UK competition authorities – is concluded successfully.
Simpson noted that European post-trade costs must still fall further to be comparable with the US. “What changed was that frictional costs became almost zero; right now across Europe, the frictional costs of moving flow are still significant,” he said.
The Preferred Interoperable Clearing Service may also be extended to Nasdaq OMX's Nordic exchanges. EuroCCP has a mandate to provide competitive clearing for the stock exchanges of Copenhagen, Helsinki and Stockholm, but EMCF, the incumbent CCP, which is part-owned by Nasdaq OMX, has recently stated it is not prepared to engage in interoperability arrangements without the participation of CCPs owned by large European exchange groups. Simpson says that three interoperating CCPs have had discussions with Nasdaq OMX Nordic Exchanges.
“I'm aware that some of the Nordic banks are very supportive of interoperability and frustrated that it is not yet delivered. Preferred interoperability will get market participants towards the lower clearing costs and potential to increase volumes,” he said.
EuroCCP, a division of the US's Depository Trust and Clearing Corporation (DTCC), clears equity trades in 19 markets, including Turquoise, SmartPool, NYSE Arca Europe, Pipeline Financial Group Limited and Sigma-X MTF.