Competition among Europe’s central counterparties (CCPs) can offer greater benefits to market participants than the US’s largely single-clearer model, according to Marco Strimer, CEO of Swiss clearing house SIX x-clear.
“I don’t believe we will have one clearing house for Europe,” he told an industry audience on Tuesday. “I don’t believe one clearing house is good for the markets – you have got to give clients some choice.”
Aside from stimulating price competition and lowering costs for members, Strimer said choice was also important for collateral management, pooling and the ability to clear different instruments.
Strimer’s comments come follow reports of a Banque de France-led working group to create a single clearing house for the eurozone. The proposals include a suggestion to merge the French unit of LCH.Clearnet with Eurex Clearing, the post-trade division of derivatives exchange Eurex.
While Strimer does not foresee a single European clearing house, he does expect a contraction . The current list of European CCPs includes LCH.Clearnet (SA and Ltd), SIX x-clear, Eurex Clearing, EuroCCP, EMCF, CC&G and MEFF.
“We will see some consolidation and also some joint ventures between participants at some point,” he said. “There will probably be three or four CCPs in Europe eventually, but certainly not one or two.”
SIX x-clear has so far led the way in establishing interoperability between CCPs in Europe, as promoted by the European Commission’s Code of Conduct for Clearing and Settlement. The firm has forged the only two links between CCPs seen so far. In December, it agreed interoperability with LCH.Clearnet Ltd as part of the London Stock Exchange’s competitive clearing programme, while SIX x-clear also signed a memorandum of understanding in February with EMCF, the clearing house for trading platforms Chi-X, BATS Europe and Nasdaq OMX Europe.
It is working on several more links and is seeking trade feeds from Deutsche Börse, NYSE Euronext (including NYSE Arca Europe, its pending MTF), Nasdaq OMX Europe and BATS Europe.
As well as clearing for SIX Swiss Exchange and its bond market, SWX Bonds, SIX x-clear provides CCP services to the NYFIX Euro Millennium dark pool, securities lending marketplace Secfinex, the Swiss and German equities trading of pan-European equities platform Equiduct, SWX Bonds, and buy-side crossing network Liquidnet.