Exchange group Nasdaq OMX is planning to launch a US equities clearing and settlement service next year, pitting it against the Depository Trust & Clearing Corporation (DTCC) and introducing competition into the post-trade space for US equities. The group expects the new service to launch by mid 2009, with testing beginning in Q1.
Nasdaq OMX acquired the Boston Stock Exchange Clearing Corporation (BSECC), a registered clearing agency, when it bought the Boston Stock Exchange on 29 August. It plans to rename the unit Nasdaq Clearing Corporation (NCC) and file updated rules with the US Securities and Exchange Commission to operate NCC as an equities clearing agency.
The new service will provide continuous net settlement, act as a central counterparty to guarantee trades, and link to the US Depository Trust Company (DTC) and settling banks.
“Nasdaq OMX intends to lower the total cost of trading by driving efficiencies in US equities clearance and settlement,” the group said in a trader alert posted on its nasdaqtrader.com site. It argued that the existing single-agency model has no competition to drive cost efficiency.
Nasdaq OMX plans to compete on pricing, service and innovation with NCC. The new service will offer reduced, transparent pricing to allow for accurate forecasting. The group also said the service will reduce the complexities of clearing and provide the opportunity to shrink expenses in related operations.
The exchange group will use its INET technology to process all the core functions of NCC’s offering. It also stressed that the service is open to all on an equal basis. Membership or market centre of execution will not count for or against a participant with regards to access or pricing. “Nasdaq OMX expects the introduction of competition to make trading US equities less expensive on all venues, including Nasdaq OMX exchanges,” the firm said.