Oslo Børs, Norway’s national stock exchange, has announced plans to launch a multilateral trading facility (MTF) for over-the-counter (OTC) derivatives.
Oslo Connect is scheduled for launch later this quarter, having received approval from the Financial Supervisory Authority of Norway earlier this week to be registered as an MTF. According to the Norwegian exchange, the new trading venue will be based on a set of rules that will ensure higher standards of consistency and the openness than an unregulated marketplace could offer.
Oslo Børs already offers trading in derivatives based on 15 underlying shares listed on the exchange, and derivative contracts for Norway’s OBX index, but tapping into to the OTC derivatives market will potentially allow its new MTF to trade tailor-made derivatives for any underlying share.
Thanks to a strategic partnership between Oslo Börs and the London Stock Exchange (LSE), which encompasses the LSE’s EDX London trading platform for Scandinavian and Russian derivatives, members of Oslo Connect will also be able to trade OTC derivatives outside Norway.
Trading on Oslo Connect will take place either through the EDGE platform, provided by trading system developer Baymarkets, or through the Oslo Børs Market Place Service for derivatives.
The EDGE system enables clients to register trading interests and access pre-trade price information. Members will also be able to negotiate contract parameters on an anonymous basis before entering into a trade. Oslo Clearing, a member of the Olso Børs VPS Group, will act as Oslo Connect’s central counterparty.
“Oslo Børs recognised OTC derivatives as an attractive market in which to operate quite some time ago. We believe that it should be possible to trade in a market as large as this on a regulated marketplace,” said Bente Landsnes, president of Oslo Børs and group CEO of Oslo Børs VPS, in a statement. “In addition, the financial crisis has made market participants much more aware of counterparty risk, and we can meet their needs with the services of Oslo Clearing.”
European and US regulators are currently thrashing out new rules for the over-the-counter (OTC) derivatives markets that centre on contract standardisation and use of central counterparty clearing in a bid to reduce trading risks.