Pan-European exchange operator Euronext has revealed it is in talks with EuroCCP to acquire a 20% stake in the interoperable equities clearer.
The firms have signed a memorandum of understanding to finalise the acquisition of a 20% stake by Euronext for €14 million, including a contribution to regulatory capital.
Euronext said it will offer choice in clearing within the Eurozone by implementing a preferred central counterparty (CCP) model for its equity markets. It said the deal will allow clients to benefit from operational and cost efficiencies.
The preferred clearing service will give trading participants a choice of CCP, and where both sides of a trade choose EuroCCP then executed trades will be able to benefit from increased netting opportunities and reduce frictional post-trade costs, a statement from Euronext said. It goes on to say this model will be followed by a fully interoperable service that will be open to other CCPs in the future.
“Our investment in EuroCCP and the implementation of a preferred CCP model will ensure the long-term delivery of clearing choice for our diverse range of equity clients. It further reduces the frictional costs of trading on our equity markets. This is a step forward in our commitment to offer optionality to all our clients in the Eurozone and to power pan-European capital markets to finance the real economy.” said Stéphane Boujnah, Chairman and CEO of the Managing Board of Euronext NV.
There has recently been concern that cash equities clearing in Europe could become uncompetitive as a result of the proposed London Stock Exchange Group (LSEG) and Deutsche Boerse merger. The two entities have a significant presence in equities and derivatives clearing and could become a dominant force in Europe should the merger go ahead.
Lee Hodgkinson, head of markets and global sales at Euronext and CEO of Euronext London, declined to comment on the impact of the merger between LSEG and Deutsche Boerse, but said: “This is a strategic step for us into the clearing business to ensure we have sustainable clearing in cash equities in Europe. We are confident EuroCCP will continue to go from strength to strength.”
Diana Chan, CEO of EuroCCP, told The Trade that the deal with Euronext is a major step towards achieving a fully interoperable cash equity clearing market in Europe.