MTFs and clearers bemoan delayed access to Italy

European multilateral trading facilities Chi-X and Turquoise, and clearing provider EuroCCP, which will clear Turquoise’s trades, have expressed their surprise and disappointment about a settlement hitch that will delay their plans to launch in Italy.
By None

European multilateral trading facilities Chi-X and Turquoise, and clearing provider EuroCCP, which will clear Turquoise’s trades, have expressed their surprise and disappointment about a settlement hitch that will delay their plans to launch in Italy.

The firms claimed that Monte Titoli, Italy’s central securities depository, through which all Italian equity trades must be settled, has delayed the testing schedule it had agreed with new clearing entrants – EuroCCP and Fortis’s European Mutlilateral Clearing Facility (EMCF), which will clear Chi-X’s trades. This means platforms using these clearers will not be able to trade in Italy as early as they had hoped. Monte Titoli is now part of the London Stock Exchange Group following its purchase of Italian stock exchange Borsa Italiana.

“At best, this late-stage refusal to do the testing when agreed with Monte Titoli is not in the spirit of the Code of Conduct or MiFID,” a Turquoise spokesman told “The biggest impact will be on the buyers and sellers of Italian shares, who won’t be able to get the benefit of Turquoise or EuroCCP.”

Peter Randall, CEO of Chi-X, added, “I am deeply disappointed that my participants will be prevented from trading in Italian equities. We have a large number of customers who are interested in seeing competition in the Italian market.”

Turquoise was due to start trading five Italian stocks on August 18 as part of its initial launch phase, which will commence on August 15. Chi-X was planning to start trading in the country in the second half of August. EuroCCP was due to begin testing with Monte Titoli this week.

The delay will not just affect Turquoise and Chi-X. As well as serving Chi-X, Fortis’s EMCF will also provide clearing services to fellow MTFs BATS Europe and Nasdaq OMX Europe, which are scheduled to launch this year.

“Unfortunately Monte Titoli is not able to meet the earlier communicated introduction date of August. This might prevent the MTFs serviced by EMCF to start offering trading in Italian equities,” said a spokesperson for Fortis. “EMCF and its partner for ?Italian settlements, BNP Paribas, are looking at alternatives.”

The spokesperson added, “We hope and expect this will only be a temporary delay and we will continue to work with Monte Titoli and its excellent staff to ensure a timely delivery.”

Monte Titoli’s revised schedule has come as a shock to some, because they were only informed last week that the original plan would not be adhered to. “EuroCCP and Citi (Turquoise’s settlement agent) had an agreement with Monte Titoli going back to May on the testing schedule and the agreement that we would have this testing process,” said Stuart Goldstein, managing director of corporate communications at the Depository Trust & Clearing Corporation, EuroCCP’s parent company. “There were several subsequent meetings to that discussion, and there was no indication that it would be problematic or that there would be an issue in keeping to that schedule or meeting the objective of completing testing in time for Turquoise’s 15 August launch.”

He added, “The testing was supposed to take place this week, but we were only notified on 17 July that all bets were off.”

Other sources with an understanding of the situation have confirmed that new entrants were informed of Monte Titoli’s revised schedule on 17 July.

The delay in Monte Titoli’s testing schedule is related to the migration of MTA, Borsa Italiana’s electronic order book, to TradElect, the London Stock Exchange’s high-speed trading platform. The migration is planned for September, subject to customer readiness. “In order to grant the smooth transition to the new platform, it was decided to devote all efforts to the set-up of the test environment of the new X-TRM software supporting the trading business. As a consequence, any new participants will have to test on the new platform,” Monte Titoli said in a statement.

Monte Titoli’s statement suggests that a firm date for settlement to be in place had not yet been agreed with EuroCCP, and that EuroCCP had also changed its plans.

It said that EuroCCP was notified that any go-live date would have been confirmed subject to the submission to the Italian supervisory authorities of a comprehensive document describing, among other things, the agreed operating model, a risk impact analysis and the timetable of test activities; or the achievement of positive test results.

“A first operating model was jointly agreed last May. EuroCCP asked for a change on 24 July 2008,” the statement said. “Monte Titoli informed EuroCCP that test activities have to take place on the new platform to be launched later in September and available for testing starting from 11 August 2008 to all clients.”

The row was sparked on Thursday by a letter from Turquoise CEO Eli Lederman to the MTF’s users, informing them of a developing situation that could delay trading on Italian shares through Turquoise. “Monte Titoli, the central securities depository, now indicate that they will not be able to allocate resources to work with EuroCCP on the agreed schedule. It is not clear when these resources will be made available,” the letter read.

In its statement, Monte Titoli hit back at the letter, expressing its concern about the content. It pointed out that Turquoise and Monte Titoli had not been in direct contact. “All details provided in the letter do not come directly from Monte Titoli. They are therefore inaccurate and largely incorrect, as they are the result of misinterpretation of information passed through by third parties,” the statement read.