Exchange group Nasdaq OMX has shelved plans to establish a US equities clearing house to compete with the Depository Trust & Clearing Corporation’s National Securities Clearing Corporation (NSCC).
The plans, which the group unveiled in October 2008, envisaged reviving the Boston Stock Exchange Clearing Corporation (BSECC), which it acquired when it purchased the Boston Stock Exchange earlier that year, to offer a continuous net settlement (CNS) clearing service for US equities, which it would rename as the Nasdaq Clearing Corporation (NCC). Nasdaq OMX had originally planned to launch the new clearer in mid-2009.
Nasdaq OMX said it had rethought its approach because it believes the threat of competition to the DTCC had achieved the exchange’s intended aims of lowering the cost of US equities trading, improving service and efficiencies and promoting innovation.
“DTCC has made a number of changes to its NSCC pricing models and schedules, and promised significant improvements in record and guarantee processing, since Nasdaq OMX first indicated its intention to enter the clearing space,” the exchange said in a statement. “These changes already bring much of the value that we intended for the NCC to bring to industry participants.”
Despite suspending the plans, Nasdaq OMX said it is “re-evaluating opportunities for participation in the US equity clearing space’ and will retain its current clearing assets, which include clearing licences for the BSECC and the Stock Clearing Corporation of Philadelphia, which came with the acquisition of the Philadelphia Stock Exchange in 2007.
“While the CNS approach is being suspended, Nasdaq OMX believes there continue to be cost, service and innovative values to be found in the US equity clearing markets” the exchange said. “We will continue to grow the understanding and vision of our post-trade and clearing team to uncover these opportunities.”
Nasdaq OMX’s plans to launch a clearer drew heavy fire from DTCC. Stuart Goldstein, a spokesman for the clearer, described the plans as a backward step at the time, pointing out that the US market rejected the notion of post-trade fragmentation and competition more than 30 years ago. In 1977, NSCC took over the clearing and settlement operations of the New York Stock Exchange, American Stock Exchange and the National Association of Securities Dealers.
NSCC clears virtually all broker-to-broker trades in the US for equities, corporate and municipal debt, American depositary receipts, exchange-traded funds and unit investment trusts.