Exchange group Nasdaq OMX has delayed the launch of the planned central counterparty (CCP) for its exchanges in Copenhagen, Helsinki and Stockholm, and has scrapped plans to include Nordic-specific features in the CCP and establish a Nordic clearing fund in response to comments from members.
The new CCP will now offer an interim ‘voluntary’ CCP service from February instead of this month, and has pushed back the launch of the full CCP service from June to October.
The exchange originally announced the plans to set up the Nordic CCP last October, when it purchased a 22% stake in pan-European clearing house EMCF from its parent, Fortis Bank Nederland. EMCF will operate the Nordic CCP from launch.
“The delay was based on member consultation in the Nordic countries and London. We realised it was not realistic to be up and running before October,” Hans-Ole Jochumsen, executive vice president, Nasdaq OMX, told theTRADEnews.com. However, he pointed out that CCP projects in other European countries have taken up to three years. “If we look at the total process time, it is still quite fast compared with the introduction of CCPs historically,” he said.
The firm scrapped the specific Nordic features because both international and local members realised it would affect adversely the CCP’s interoperability with non-Nordic clearing houses. “Members realised that they would prefer a more open set-up with the possibility for competition in the cash clearing area,” says Jochumsen. “That is in line with London, where brokers and MTFs are pushing for interoperability between the clearing houses.”
Nasdaq OMX’s amended CCP plans have won praise even from would-be rivals. “It is a positive step that they have moved away from the idea of a Nordic margin pool,” said Olof Neiglick, CEO of Burgundy, a Nordic MTF scheduled for launch in Q2 this year. “The original plan to have a special pool with only Nordic participants would have prevented cross-clearing with other EMCF participants. Now it is a European pool for all exchanges and MTFs, which means one can buy on the exchanges and sell on the MTFs and vice versa.”
Neiglick added that the revised timeline was also more realistic for market participants.
Burgundy is also planning to launch a CCP service for its trading platform in Q4. “We are negotiating at the moment with the CCP providers, and we will make our announcement in February,” said Neiglick.
A number of previous attempts to establish a Nordic CCP have foundered, but a renewed focus on counterparty risk in the past six months has given the project fresh impetus. ”The conclusion had been that there was not strong enough interest from the local broker-dealers,” said Goran Fors, global head of custody services at Swedish bank SEB. “In September, there was a change in the attitude due to the counterparty risk situation that arose after Lehman, so there was suddenly a lot of interest in introducing a CCP.”