The Swiss National Bank has given the green light to SIX x-clear, the central counterparty (CCP) owned by SIX Group, for its interoperability arrangement with UK-based clearer LCH.Clearnet for the second time.
The move follows a similar approval for the link by UK regulator the Financial Services Authority (FSA) in recent weeks, and market participants are now hopeful that the second round of approval will act as framework for interoperability agreements between other CCPs.
Linking CCPs would reduce trading costs by allowing brokers to select a single clearer across Europe, thereby reducing the need for brokers to connect to multiple CCPs to process trades executed on different trading venues.
The LCH.Clearnet and SIX x-clear link was first established in September 2008 and remains the only live interoperation between two European clearing houses.
Linkage agreements with other CCPs – EMCF and EuroCCP – were agreed in principle in late 2009, but were hampered by requests from the FSA, Dutch regulator AFM, Switzerland's FINMA and the Dutch and Swiss central banks in February 2010 for applications to be resubmitted to take account of inter-CCP risk.
The regulators were concerned that interoperability between Europe's clearing houses might introduce concentration of risk, undermining the stability of the region's clearing infrastructure.
The newly approved LCH.Clearnet/SIX x-clear link addresses these concerns, with new proposals for margin collateral and risk management processes.