Spanish Market Reforms & EuroCCP service in Spain

 

EuroCCP has offered clearing services for the Spanish market since February 2009. The service is currently available to the following platforms supported by EuroCCP - NYSE Arca Europe, SIGMA X MTF, SmartPool, Turquoise - and will be available on Omgeo CTM.

The Spanish market is home to some of the most liquid European stocks, however, trading of these stocks by international investors has proved problematic and expensive. The extra costs involved in transferring transaction flows from new alternative trading venues into a pre-existing post-trade system, designed around a traditional, national stock market with no concept of central counterparty and central netting, have reduced the ability of MTFs to compete. Regulatory changes introduced on 18 January 2011 – also known as Title V – and further reform initiatives currently under discussion – Title VI – intend to address this issue and should result in a more competitive market and increased liquidity.

 

 
 

 
What is Title V?
Title V is a regulation that allowed changes to the Iberclear settlement system which improved the efficiency of the settlement process for trades executed outside of the domestic stock exchange, the BME. More
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What is Title V? – more information   Hide
 
What are the main features of Title V?

Two new trade types are now available, one for MTF trades cleared through a CCP and one for OTC trades.

The major impact of this reform is that shares can be reregistered into different beneficial owner names without the need for a cross on the BME. CCPs now have the ability to manage registrations directly at Iberclear, thus significantly reducing transaction costs and risks for their customers.

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What are the main features of Title V? – more information

Iberclear have also changed the processing timeline for MTF trades:

  • Registrations and allocations have to be received by the CCP on TD+1 by 5 p.m. GMT, 6 p.m. CET.
  • Settlement obligations must be pre-advised or matched by 2 p.m. GMT, 3 p.m. CET.
  • Settlement obligations not pre-advised or matched will be cancelled, and can be re-input with a new trade date and a subsequent change of the settlement date.
  • Transactions not settled by 1 p.m. GMT, 2 p.m. CET, are automatically cancelled, and can be re-input with a new trade date and a subsequent change of the settlement date.

These changes have created a concern in the trading and clearing community about the potential increase in processing costs and risks associated with MTF trades. This has been addressed by a CCP discipline regime designed to encourage trades to match and settle within the deadlines.

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Cost savings with EuroCCP
With the adoption of Iberclear Title V, EuroCCP participants benefit from significant cost savings: More
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Cost savings with EuroCCP – more information

Please note that new Iberclear registration fees associated to each settlement have been introduced, with a cap of €4.55 per settlement.

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When was it effective?

The changes were implemented by Iberclear on 18 January 2011.

They were available to trading firms active on pan-European MTFs on 3rd May 2011, once implemented by EuroCCP and EMCF following extensive market consultation.

 
How is the EuroCCP service working?
The EuroCCP process flow for Spanish equities transactions is now more in line with the standard process flow applied for any other market cleared by EuroCCP (see diagram below). More
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How is the EuroCCP service working? – more information
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Who can benefit? Which platforms? Which users?

Currently this service is available on NYSE Arca Europe, SIGMA X MTF, SmartPool, Turquoise.

Clearing Participants are invited to contact the EuroCCP Account Administration team (euroccpaa@dtcc.com) for implementation.

 
EuroCCP in numbers
EuroCCP is pleased to announce a 100% settlement success ratio since the implementation of the Title V changes on 3rd May 2011. No CCP discipline has been enforced to date.
 
Next step - Title VI

Iberclear is leading discussions with CCPs to design a model aligning the MTF/CCP settlement procedure with the one in place for on-exchange (BME) transactions.

Functional specifications are currently under review, and the legal framework is being drawn. Implementation is currently scheduled in 2012.