Oslo Børs has become the latest exchange to implement a vertically-integrated clearing model as it bids to stem the loss of market share to rival trading venues.
The exchange commenced a soft launch with its central counterparty (CCP), Oslo Clearing, for five Norwegian stocks – Sevan Marine, Nowegian Property, Songa Offshore, Fred Olsen Energy and TGS-NOPEC Geophysical Company – at the end of last week.
Oslo Clearing, which is 100%-owned by Oslo Børs, will establish a default fund using contributions from its clearing members. The full rollout, which is scheduled for 18 June, will include the migration of equity certificates and exchange-traded funds, as well as the remaining Norwegian listed equities, to Oslo Clearing.
The introduction of a CCP is intended to allow the exchange’s members to reduce their risk exposure when trading with each other. Until now, transactions between Oslo Børs members have been cleared bilaterally and settled through Verdipapirsentralen, the Norwegian central securities depository.
“The CCP structure will help to ensure that existing market participants continue to trade in the Norwegian market, as well as attracting new participants. As one example, the availability of CCP clearing is virtually essential for growth in algorithmic trading”, said Christian Sjöberg, CEO of Oslo Clearing.
The move comes after Nasdaq OMX, which operates the Nordic exchanges in Stockholm, Helsinki and Copenhagen, launched CCP services for its bourses in October last year. Nasdaq OMX in Stockholm started trading Norway’s OBX index in March 2009, taking advantage of MiFID’s capabilities for regulated exchanges to trade stocks from other countries. During May 2010, Nasdaq OMX Stockholm accounted for 3.4% of OBX trading, according to data vendor Thomson Reuters. Multilateral trading facility Chi-X Europe, which uses pan-European CCP EMCF for its post-trade services, traded 4.6% in the same month.
Oslo Børs is the second exchange to move forward with plans to bring clearing services in-house in recent weeks. NYSE Euronext, the operator of domestic markets in Lisbon, Amsterdam, Paris and Brussels, confirmed plans to ditch its incumbent clearing provider LCH.Clearnet by 2012, prior to building two new clearing houses in Paris and London to support its trading business.
London Stock Exchange CEO Xavier Rolet revealed last month that his bourse was reviewing its own relationship with LCH.Clearnet following doubts over the firm’s “quality and resilience”.
“By providing an infrastructure service that gives market participants reduced risk and lower costs, we are improving our overall offer. Having a CCP structure in place also helps to strengthen our group’s competitiveness. We have now established a CCP structure in Norway that it is fully competitive with similar marketplaces internationally,” said Bente Landsnes, CEO of Oslo Børs.