EuroCCP is pushing for equity exchanges to become wholly interoperable in 2014 to stimulate greater competition in the clearing market.
There are currently three central counterparties (CCPs) in Europe that offer interoperable services; EuroCCP, X-Clear and LCH.Clearnet.
While many European exchanges now offer clearing from two or three of these CCPs, EuroCCP’s CEO, Diana Chan, said those exchanges that do not offer the full selection should aim to become fully interoperable.
"Between EuroCCP, X-Clear and LCH, we clear over 60% of European trades executed on regulated trading platforms, but this doesn't tell the whole story,” Chan said.
“Some exchanges clear with two of us and some with just one. What we want to see is all three pan-European CCPs having equal access to all of these platforms so clients are able to direct all their trades to their CCP of choice. This would allow CCPs to compete on quality, innovation and pricing."
Currently, most multilateral trading facilities in Europe offer interoperable clearing with multiple clearers, but EuroCCP wants the three major, national European exchanges which currently only offer clearing through a single interoperable CCP to expand their offering. London Stock Exchange (LSE) uses LCH.Clearnet (which it owns a 60% stake in), Six Swiss Exchange uses it’s own X-Clear service while Nasdaq OMX clearing is conducted by EuroCCP since it merged with EMCF last year.
Chan said: "We hope that the LSE, NASDAQ OMX and Six Swiss Exchange will fully open up clearing to all three interoperating CCPs. We think that they do recognise the benefits of providing choice to their customers, but they may have other things to get done first."
She said that exchanges are facing significant work on regulatory, technology and business issues this year, but wants them to keep a review of clearing arrangements on the agenda to improve the experience of market participants.
Chan also questioned the logic of other national exchanges continuing to create and run their own CCP given current market conditions.
"When national exchanges optimise their portfolio of business and deploy limited resources to focus on achieving higher profitability, they might come to the conclusion that equities clearing is not a strategic part of their business. Then they might decide to concentrate on trading and let their clients have access to competitive, interoperable clearing services," she explained.