Nasdaq OMX Nordic, operator of domestic markets in Sweden, Finland and Denmark, has again delayed plans to offer a choice of equities clearers.
The exchange group had initially planned to offer interoperability in May, but said it would delay its plans until October after guidelines on interoperability from regulators were released. However, citing finalised guidelines on interoperability from the European Securities and Markets Authority relating to the European market infrastructure regulation (EMIR), Nasdaq OMX has postponed its plans indefinitely. EMIR is Europe’s blueprint for over-the-counter (OTC) derivatives reform, but also includes a requirement for ESMA to report on interoperability – which is currently only available for the cash market – before the end of the year. A report for interoperability in the swaps market would be deferred until 30 September 2014 to give ESMA time to assess associated risks. By having a choice of clearers, market participants are able to choose a single central counterparty for their trading activity, allowing them to net trades at the post-trade level, thereby reducing overall trading costs.
“Until the ESMA guidelines on interoperability arrangements become available on 31 December there are uncertainties that prevent us from announcing a firm timeline,” Bjørn Sibbern, head of the Nordic equity market, Nasdaq OMX, told theTRADEnews.com. “We’re still very much in favour of a competitive clearing model but do not want to implement something now that we may have to revisit and revise later. Such an exercise could prove costly both for us and our members.”
Another reason behind Nasdaq OMX’s postponement, said Sibbern, was the lack of progress made by other domestic bourses.
“We’d also like to see other incumbent exchanges show some sign towards willingness of an open CCP model,” he said.
While multilateral trading facilities including Nordic-focused Burgundy – which is in the process of being acquired by Oslo Børs – BATS Chi-X Europe and Turquoise – offer three or more clearers, exchanges have been reluctant to follow suit.
“We hope Nasdaq do come on board with interoperability as soon as possible,” said Mark Hemsley, CEO of BATS Chi-X Europe, which offers four clearers on both its CXE and BXE order books. “If customers think the other exchanges are dragging their feet and feel strongly about it, they may well reward venues that offer interoperability.” Around 50% of the trading volume on BATS Chi-X Europe is now cleared by the interoperating CCPs.
However, the London Stock Exchange has committed to an open clearing model once its takeover of Anglo-French clearing house LCH.Clearnet has cleared regulatory hurdles. Upon completion of the deal, the LSE will own LCH.Clearnet Ltd and its French LCH.Clearnet SA subsidiary, as well as CC&G, the domestic Italian CCP it purchased as part of its 2007 takeover of Borsa Italiana – none of which are currently linked.
If current proposals by the European Parliament’s Economic and Monetary Affairs Committee are upheld, domestic exchanges and central counterparties could be compelled to offer open access to competitors to facilitate competition in cash equities and fixed income clearing. The final version of MiFID II is expected by 2014.
NYSE Euronext and Deutsche Börse declined to comment for this article, while the LSE said it plans to clarify its stance on interoperability once its deal with LCH.Clearnet is finalised. According to data from Thomson Reuters, Nasdaq OMX Nordic, LSE, NYSE Euronext and Deutsche Börse accounted for over 47% of the value traded in European equities last month.