By Stuart Z. Goldstein

DTCC announced on April 18 that its EuroCCP subsidiary has been selected to provide a clearance and settlement solution for Turquoise, a consortium of seven major financial institutions that are working to develop a new pan-European trading platform.

EuroCCP will provide all clearing, settlement and risk management services to Turquoise. Citi's global transaction services business will serve as EuroCCP settlement agent. This partnership recognizes Citi's extensive pan-European securities network and its strong links with the European central securities depositories.

This decision follows a request for proposal (RFP) process that has been under way for a number of months and involved a rigorous review of proposed alternative post-trade solutions.

Certainty and reliability
DTCC has a well earned reputation for certainty and reliability, and more than 30 years' experience in clearing and settling virtually all equity and fixed income trading in the U.S. Last year, DTCC cleared and settled more than $1.5 quadrillion in securities transactions. In addition, it provides post-trade services to the over-the-counter derivatives market on a global basis. EuroCCP will build upon DTCC's extensive experience and technology know-how as a central counterparty (CCP).

"We are delighted that EuroCCP has been selected to support Turquoise," said Donald F. Donahue, DTCC president and CEO. "We have a long history of providing clearing and settlement solutions across the industry and a strong track record of helping customers lower transaction costs, reduce risk and improve efficiency. Over the coming months, we will be working very closely with Turquoise and we're confident that we can deliver this highly scalable, central counterparty platform within the timeframes required."

‘Exciting new trading venue'
"DTCC is well known in the global financial services market, and it presented a well-thought-out proposal to the consortium," said a Turquoise spokesperson. "The face of financial services is becoming much more global in nature and, as old barriers break down in Europe under MiFID and other directives, the landscape is becoming much more competitive. We believe EuroCCP and Citi's global transaction services business will help Turquoise to succeed as a new, low-cost, pan-European platform that can build the necessary liquidity to make it a major contender against existing trading venues." (MiFID stands for Markets in Financial Instruments Directive.)

"We are very pleased to partner with EuroCCP as settlement agent for Turquoise," said Clive Triance, chief operating officer for Securities and Fund Services, Europe, Middle East and Africa at Citi. "Citi has settlement capabilities in over 80 markets globally, including all the European markets covered by Turquoise. Our established relationships with the European central securities depositories will ensure local settlement efficiency. We look forward to working with EuroCCP in supporting this exciting new trading venue."

How the platform will work
EuroCCP will accept trades from the Turquoise trading platform and these trades will then be netted on trade date. EuroCCP will guarantee trades upon receipt and validation. For all trading members of Turquoise that are not clearing members of EuroCCP, these trades will be handled through general clearing member relationships.

EuroCCP will apply risk-based margining, with appropriate levels of margin collected on a daily basis. Any unsettled obligations will be marked-to-market each day.

Citi's global transaction services business will process EuroCCP's settlement instructions for delivering and receiving securities and related payments in various currencies through its local securities network.

EuroCCP will be a UK Recognised Clearing House (RCH), headquartered in London. DTCC is in the process of filing an application with the Financial Services Authority (FSA) to receive such recognition in time for the Turquoise launch date. EuroCCP will be operated on an "at-cost" basis, and any excess revenues collected beyond the cost to support the operation will be refunded to participant members.

The seven investment banks behind Turquoise are Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, Merrill Lynch, Citi and UBS, which together generate around half of Europe's equity order traffic. @