Regulatory inconsistency behind Nasdaq clearing delay

Nasdaq OMX Nordic has blamed potential regulatory contradictions for delays to its plans to offer clearing choice, according to the exchange’s head.

Nasdaq OMX Nordic has blamed potential regulatory contradictions for delays to its plans to offer clearing choice, according to the exchange’s head.

Hans-Ole Jochumsen, president of Nasdaq OMX Nordic, said there was a real risk recent recommendations from the International Organisation of Securities Commissions (IOSCO) and Committee of Payments and Settlement Systems (CPSS) could contradict interoperability requirements in the European market infrastructure regulation (EMIR).

While EMIR is mainly recognised as Europe’s blueprint for OTC derivatives reform, it includes provisions for the criteria national regulators should use for assessing interoperability requests. Proposals related to this will be thrashed out by securities watchdog, the European Securities and Markets Authority (ESMA), in conjunction with the European Central Bank (ECB) and will be presented by the end of the year. Separately, CPSS-IOSCO last month released standards to ensure the robustness of financial market infrastructure, barely days after Nasdaq’s postponement was announced.

“There is some scepticism within the ECB on the viability of interoperability,” Jochumsen told “As long as the proposals relating to how interoperability requests should be handled are not finalised, there is a risk the model will be different to what is in place now. This could mean those already offering clearing choice could be forced to make changes.”

Jochumsen added he had spoken recently with ESMA chairman Steven Maijoor and IOSCO secretary general David Wright and said they both “recognise the importance of not having any contradictions”.

Nasdaq OMX Nordic – which runs domestic markets in Sweden, Denmark and Finland – was expected to offer clearing choice between EuroCCP, the European clearing arm of US post-trade utility Depository Trust and Clearing Corporation, Swiss clearer SIX x-clear and the exchange group’s incumbent central counterparty (CCP) EMCF last month.

The postponement of the exchange group’s plans drew fire from industry bodies in the Nordic region, a number of which has reportedly prepared the systems in anticipation of multiple clearers. While Nasdaq OMX has not set a date for interoperability, Jochumsen said the exchange would revisit the issue in September.

Alternative markets in the region have moved ahead with their plans to offer clearing choice, irrespective of the finalisation of new rules.

On 6 January, BATS Chi-X Europe, the recently merged entity that completed its technology migration yesterday, launched full four-way interoperability schemes involving the MTFs’ incumbent clearer EMCF, Anglo-French CCP LCH.Clearnet, SIX x-clear and EuroCCP. Turquoise also offers a similar scheme, while Equiduct, the regulated market majority-owned by Citadel Execution Services, became the latest to embrace interoperability, after announcing plans to hook up with EuroCCP last week.

If Nasdaq OMX Nordic met its April deadline, it would have been the first exchange to offer a choice of more than two clearers. Jochumsen stressed the delay was not influenced by the continued reluctance of other domestic markets such as NYSE Euronext and Deutsche Börse to commit to clearing choice.

“We are getting regulation on interoperability because it appears that policy makers are disappointed more progress has not been made since the introduction of MiFID,” he said. “Unlike other exchanges, we are committed to a level playing field and we see the need for European equity trading to have interoperability in place to have an efficient system.”