ICE prepares clearing house changes for European open access

ICE will be required to change their vertical clearing model to allow open impartial access.

IntercontinentalExchange (ICE) has begun making changes to its European clearing house in preparation for incoming open access rules.

Jeffrey Sprecher, CEO and chairman of ICE and a frequent critic of open access and MiFID II, said during an earnings call that it is building out its capabilities to go beyond central clearing.

“We’ve continued to make sure that the ancillary services that we provide around the trading venues, where we do believe there will be fragmentation, offer a lot of capabilities to our end-users,” Sprecher said.

“So you’ve seen us take on the ability to create more indices, improve our data offerings, improve the kind of consultative compliance services that we offer to our customers… which will all largely become unbundled as the market fragments and create opportunities for us.”

In April, the European Securities and Markets Authority (EMSA) ruled out a temporary exclusion for exchange-traded derivatives from the open access regime.

The rules mean clearing houses that operate a vertical silo model, such as ICE, will have to make significant changes to facilitate open access.

MiFID II is seeking to open the market and introduce competition, by enabling market participants to choose their clearing house independently of the venue on which they execute.

However, Sprecher believes the open access regime will actually stifle competition and rather favour the incumbent clearing houses.

“We also think that it will be very, very difficult and hard and [add] very little incentive for any third party to start a major clearing house when the existing clearing houses have open access,” Sprecher added.

“So in an odd way, while it’s meant to stimulate competition, it at the end of the day, probably entrenches the incumbents, including ICE who has a large clearing presence in Europe.”