LCH.Clearnet Ltd and European Multilateral Clearing Facility (EMCF) have become the latest clearing houses to sign a memorandum of understanding to interoperate with each other.
The agreement will allow competitive clearing for market participants who wish to centralise their clearing operations with a single central counterparty (CCP). In the first instance, interoperability will be for UK and Swiss stocks only. EMCF currently clears for BATS Europe, Chi-X Europe and Nasdaq OMX Europe.
Speaking to theTRADEnews.com last week, Jan Booij, CEO, EMCF, said the recent decision of pan-European trading venue BATS Europe to replace EMCF with Swiss rival SIX x-clear to clear UK and Swiss stocks, could compel the CCP to accelerate its interoperability plans.
According to industry sources, EMCF was reluctant to cooperate with LCH without securing access to trade flows from the London Stock Exchange (LSE), for which LCH.Clearnet Ltd is the principal CCP. However, a spokesperson for LCH said today’s deal would not give EMCF access to LSE flow.
“After the first announcement of an interoperable link with x-Clear some months ago, I am pleased EMCF will be able to provide a second link with another CCP in Europe thus allowing customers in Europe optimal flexibility in choosing their clearing partner,” said Jan Booij, CEO of EMCF.
The deal with EMCF means that LCH.Clearnet is now able to clear stocks for five European MTFs, following agreements with Turquoise and NYSE Arca Europe on 6 May. EMCF signed a deal to interoperate with SIX x-clear at the beginning of February.
As a result of the agreement between EMCF and LCH.Clearnet, and the memorandum of understanding signed between EMCF and SIX x-clear in February, Chi-X Europe has announced that it will offer a three-way clearing choice to its members. The MTF expects that participants will be able to clear through x-clear and LCH.Clearnet by the end of Q3 2009, subject to regulatory approvals. EMCF has cleared for Chi-X since the MTF’s launch in April 2007.