EuroCCP, Europe’s largest cash equities central counterparty (CCP), announced that it will be clearing trades executed on London Stock Exchange (LSE) – the first of Europe’s big national exchanges to open its trade feeds to competitive clearing by three interoperating CCPs.
EuroCCP will start clearing LSE trades after legal, connectivity and operational arrangements have been finalized and regulatory approvals have been received.
“Many market participants have been waiting to have more choice in where they clear trades executed on London Stock Exchange,” said Diana Chan, CEO of EuroCCP. “The addition of EuroCCP to the central counterparties already available will bring the benefits of more competition together with reduced costs.”
Three years ago, regulators approved interoperability among four cash equities CCPs, which allows firms to clear and net all trades through a single provider of their choice, reducing settlement fees and collateral and post-trade complexity.
EuroCCP has long been a supporter of interoperability, leading the initiative for trading platforms to open up to multiple CCPs. Alternative trading platforms, also known as multilateral trading facilities (MTF), were quick to see the benefits of interoperability. EuroCCP, LCH.Clearnet and SIX x-clear are now interoperable on all the largest MTFs, which account for over 40% of all trades executed in Europe.
However, not all the interoperating CCPs have access to the same trading platforms. It is estimated that an additional 24% of trades executed in Europe could become available in this three-CCP interoperating arrangement if all the platforms that are cleared by at least one of the interoperating CCPs were to give equal access to all of them.
LSE’s commitment to extend clearing choice to all interoperating CCPs may encourage market participants to urge additional national stock exchanges to review their clearing arrangements.
EuroCCP is equally owned by BATS Chi-x Europe, NASDAQ OMX, ABN AMRO Clearing Bank and The Depository Trust & Clearing Corporation (DTCC).