EuroCCP Receives FSA Approval As ‘Recognised Clearing House’
Diana Chan, CEO, EuroCCP
European Central Counterparty Limited (EuroCCP) announced March 31 that it received approval as a U.K. Recognised Clearing House by the Financial Services Authority (FSA), solidifying its position as a competitive, low-cost alternative for clearing and settlement in Europe. EuroCCP is DTCC’s European subsidiary.
“We are delighted that the FSA has granted EuroCCP status as a U.K. Recognised Clearing House,” said Diana Chan, EuroCCP’s CEO. “Initiatives such as MiFID and the Code of Conduct are changing the landscape in Europe and allowing new service providers such as EuroCCP to help market participants further reduce transaction costs, improve efficiency and connect more seamlessly in today’s marketplace.”
EuroCCP also signed the voluntary European Code of Conduct for clearing and settlement, allowing for the interoperability of its services with other clearing and settlement houses and European trading platforms.
Value of EuroCCP model
EuroCCP was selected to clear and settle for Turquoise, a new pan-European multilateral trading facility (MTF) created by a consortium of nine major global investment banks that will trade the most liquid equities in Europe. EuroCCP will use Citi’s Global Transaction Services as its settlement agent.
“We believe the value of our ‘at-cost’, industry-governed business model will be attractive to European capital markets and their participants,” said Chan. “EuroCCP is already in active discussions with other MTF trading platforms to provide clearing and settlement services.”
The FSA approval of EuroCCP as a Recognised Clearing House followed a satisfactory in-depth review of all aspects of EuroCCP’s business arrangements as a critical market infrastructure.
How EuroCCP will work
EuroCCP will accept trades from Turquoise and other trading platforms. EuroCCP will guarantee trades upon receipt and validation, then net all transactions on all platforms in the same security into one amount for settlement per clearing participant. For trading firms that are not clearing participants of EuroCCP, these trades will be handled through general clearing participant 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 will process EuroCCP’s settlement instructions for delivering and receiving securities and related payments in various currencies through its local securities network at various national central securities depositories. Clearing participants do not need to change their settlement arrangements with existing settlement service providers.
EuroCCP is headquartered in London. It will be operated on an “at-cost” basis, and any excess revenues collected beyond the cost to support the operation will be refunded to participants. @