The re-introduction of competition in the US equities clearing space will not create additional complexity and cost, according to Brian Hyndman, senior vice president of transaction services at US exchange group Nasdaq OMX.
Nasdaq OMX is planning to launch a new US equities clearing facility, the Nasdaq Clearing Corporation (NCC), in the second half of 2009.
“We have spoken to all the major customers and their view is that this is not a step backward but a step forward,” Hyndman told theTRADEnews.com. “They welcome the competition and, given the technology advancements over the years, they don’t think this is going to add any inefficiencies to the current process.”
Launching NCC will put Nasdaq OMX in direct competition with the Depository Trust & Clearing Corporation (DTCC) which, through its subsidiary, the National Securities Clearing Corporation, provides clearing for almost all equity, corporate bond and municipal bond, exchange-traded funds and unit investment trust trades in the US.
Stuart Goldstein, managing director, corporate communications at the DTCC, told theTRADEnews in January that US brokers had shunned the multiple clearing model 20 years ago because of the need to maintain infrastructure to communicate with multiple clearers and have margin in more than one place.
In the post-Reg NMS world, said Hyndman, brokers have no problem linking to multiple trading venues. “With all the different extranets and common protocols, connectivity is quite easy now,” he said. “I don’t think any customer will have an issue connecting to another venue, and that is as true for clearing and settlement as it is for trading.”
Nasdaq OMX has filed a draft rule set with the US Securities and Exchange Commission for NCC and is developing the technology to run the new clearer. Hyndman said that regulatory approval within the next five-to-six months would keep the firm on schedule for a late Q3/Q4 2009 launch.
While Nasdaq OMX aims to reduce clearing costs for its clients, in the hope encouraging greater trading volumes, the exchange expects NCC to be profitable. “We never launch businesses to be loss-leaders. We don’t have any of those today and we don’t plan on our Nasdaq Clearing Corp being one,” said Hyndman. “We think we can make money on the clearing side, but be more efficient than the other competitor out there.”