Project Turquoise, the proposed multi-lateral trading facility (MTF) set up by seven leading investment banks to compete with the established stock exchanges, has appointed EuroCCP to handle its clearing needs. EuroCCP is the European clearing subsidiary of The Depository Trust & Clearing Corporation (DTCC).
In addition, Turquoise has appointed the global transaction services arm of Citigroup as EuroCCP's settlement agent. Citigroup is a member of the Turquoise consortium.
A Citigroup spokeswoman says "the partnership recognizes Citi's extensive pan-European securities network and its ability to efficiently process local settlement through its strong links with the European central securities depositories."
This decision follows a request for proposal (RFP) process that has been under way for a number of months and involved a review of various alternative post-trade solutions.
Last year, DTCC cleared and settled more than $1.5 quadrillion in securities transactions in its domesic US market. In addition, the American CCP provides post-trade services to the OTC derivatives market via Deriv/SERV.
"We are delighted that EuroCCP has been selected to support Turquoise," says Donald Donahue, DTCC's president and CEO. "We have a long history of providing clearing and settlement solutions across the industry and a strong track record of helping customers lower transaction costs, reduce risk and improve efficiency. Over the coming months, we will be working very closely with Turquoise and we're confident that we can deliver this highly scalable, central counterparty platform within the timeframes required."
"DTCC is well-known in the global financial services market, and they presented a well-thought out proposal to the consortium," adds a Turquoise spokesman. "The face of financial services is becoming much more global in nature, and as old barriers break down in Europe under MiFID and other directives, the landscape is becoming much more competitive. We believe EuroCCP and Citi's global transaction services business will help Turquoise to succeed as a new, low-cost, pan-European platform that can build the necessary liquidity to make it a major contender against existing trading venues."
"We are very pleased to partner with EuroCCP as settlement agent for Turquoise," says Clive Triance, Chief Operating Officer for Securities and Fund Services, Europe, Middle East, and Africa at Citigroup. "Citi has settlement capabilities in over 80 markets globally, including all the European markets covered by Turquoise. Our established relationships with the European central securities depositories will ensure local settlement efficiency. We look forward to working with EuroCCP in supporting this exciting new trading venue."
EuroCCP will accept trades from the Turquoise trading platform and these trades will then be netted on trade date. EuroCCP will guarantee trades upon receipt and validation. For all trading members of Turquoise that are not clearing members of EuroCCP, these trades will be handled through general clearing member relationships.
EuroCCP will apply risk-based margining, with appropriate levels of margin collected on a daily basis. Any unsettled obligations will be marked to market each day.
Citi's global transaction services business will process EuroCCP's settlement instructions for delivering and receiving securities and related payments in various currencies through its local securities network.
EuroCCP will be a UK Recognised Clearing House, headquartered in London. DTCC is in the process of filing an application with the Financial Services Authority to receive such recognition in time for the Turquoise launch date. EuroCCP will be operated on an "at-cost" basis, and any excess revenues collected beyond the cost to support the operation will be refunded to participant members.
The seven investment banks behind Turquoise are Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, Merrill Lynch, Citigroup and UBS, who together generate around half of Europe's equity order traffic