In the News
Clearing Competition in Europe: Progress in 2011, More in 2012?
18 January 2012 - Bylined article by Diana Chan, CEO, EuroCCP, discussing the developments of interoperability throughout 2011 and what the industry can expect to see during 2012. The article looks at the primary obstacles to competitive clearing and how regulators have been and continue to be well placed to drive change. Looking ahead to 2012, the article states that Europe’s equity markets need to become as competitive as possible and to do so, a greater number of primary markets will need to open up their trade feeds to provide trading members with true freedom of choice in clearing. Clearing houses such as EuroCCP have set the example by supporting interoperability in the interest of clearing efficiency and competition thus fully embracing the concept of open access.
Clearing Industry Embraces Stress Tests
18 January 2012 - Article reports on EACH’s recent paper addressing best practices for CCP stress testing in a bid to ensure they are able to withstand large-scale shocks to the financial system. Commenting on the guidelines − which are expected to feed into US and European regulation to ensure global convergence of CCP risk management standards − Diana Chan, CEO, EuroCCP, said: “Clearers undertake stress tests for a different reason to banks, since they actually have to go out and collect the necessary collateral from their clients. The outcome of the stress tests affect the size of the clearing house default fund which should be adequate to cover a default during exceptional market circumstances. The best practices document provides guidance on the type of market scenarios that the default fund should be constructed to cover.”
Clearing Houses: The Next Casualty of the Crisis?
16 January 2012 - Article reports that CCPs could become the next casualties of the crisis as regulators mandate that banks run their riskiest and private trades through them. There is a concern that by clearing OTC products CCPs will not have sufficient collateral to cover the scale of possible future positions. Commenting on the issue, Diana Chan, CEO, EuroCCP, said: "The mandated clearing of OTC derivatives is a complex matter on many levels. Derivatives require a lot of collateral because the duration of the contracts can be very long." Consequently, many now question who will bear responsibility for propping up any CCP that gets into trouble. Addressing this issue, Diana Chan states: "There is a wide misconception that central banks are the lender of last resort in the event of a CCP default but central banks...do not provide credit on an unsecured basis."
Interoperable MTFs primed for market share growth
10 January 2012 - The introduction of clearing interoperability on BATS Chi-X Europe could see multilateral trading facilities (MTFs) increase their market share over domestic bourses, as brokers seek to further reduce trading costs. Speaking of the advantages of CCPs, Andrew Bowley, Nomura, is quoted saying: “Our choice of CCP was driven by the commercial proposition including the fact that EuroCCP represents the best ‘horizontal’ structure and has the largest coverage of all the clearers involved in interoperability schemes, meaning we can trade five pan European MTFs with single settlement and offsetting margin”.
Bats Chi-X Europe rolls out four-way clearing interoperability
09 January 2012 - Article reports that Bats Chi-X Europe has launched its four-way interoperable clearing service which allows participants to choose from EMCF, EuroCCP, LCH.Clearnet and SIX x-clear to clear their trades. The article adds that traders and operators have spent years lobbying for clearing interoperability as a way to reduce post-trade costs. Whilst an agreement was reached some time ago progress has been stymied over the last couple of years by regulators' concerns about the associated systemic risks. Commenting on the developments, Diana Chan, CEO, EuroCCP, adds: "Following the success of preferred interoperability, EuroCCP is looking forward to seeing four way interoperability on Bats/Chi-X finally deliver to market participants the economic benefits of true competitive clearing." Further coverage also appeared in: Asset Servicing Times, Mondo-Visione, Banking Business Review, RFP Connect, AT Monitor, Automated Trader and Securities Technology Monitor.
Bats goes live with milestone clearing service
06 January 2012 - Article reports that Bats Europe, the pan-European trading platform which completed its acquisition of Chi-X Europe in December, has today gone live offering a choice of four clearers on both Bats and Chi-X Europe. Commenting on the news, Diana Chan, EuroCCP, states that “EuroCCP is looking forward to seeing four way interoperability on BATS/Chi-X finally deliver to market participants the economic benefits of true competitive clearing”.
