MOU with NASDAQ OMX for Nordic Markets
EuroCCP has signed a memorandum of understanding (MOU) with NASDAQ OMX Nordic regarding EuroCCP’s provision of central counterparty (CCP) services to NASDAQ OMX’s stock exchanges in Denmark, Finland and Sweden. The MOU advances NASDAQ OMX’s commitment to offer competitive clearing in its Nordic markets.
Subject to the finalization of appropriate interoperability agreements, EuroCCP will become one of three CCPs offering clearance and settlement services to customers of NASDAQ OMX in the Nordic region. The other two clearers comprising this multiple-CCP proposal will be SIX x-clear and EMCF (European Multilateral Clearing Facility). SIX x-clear Ltd is part of SIX Group Ltd, which also includes the Swiss stock exchange and central depository. EMCF is 22% owned by NASDAQ OMX.
Signing of the MOU follows NASDAQ OMX’s announcement in January that it intended to seek other CCP partners, in addition to EMCF, for the Nordic region.
“EuroCCP strongly supports the development of interoperability and competition between CCPs in Europe, and NASDAQ OMX’s moves to build a multiple-CCP model for its Nordic markets mark an important step forward in this development,” said Diana Chan, CEO of EuroCCP. “Market participants will welcome the ability to use the CCP of their choice.”
Interoperability takes off
Giving customers a choice of CCPs to clear and settle their trades requires that CCPs interoperate with one another. Interoperability, a provision in the European Code of Conduct for clearance and settlement, aims to introduce competition among CCPs in order to reduce clearing tariffs and enhance service levels for market participants. CCP interoperability, when combined with the cross-netting of trades across trading venues, will result in significant cost savings to market participants through settlement netting and reduced margin requirements. It also allows market participants to choose a CCP with the business and risk management model that best fits their corporate objectives.
Separate from the NASDAQ OMX Nordic developments, EuroCCP and SIX x-clear Ltd in early May announced their signing of an MOU that outlines their commitment to interoperate with each other, thereby offering any exchanges or platforms they work with competitive clearing services under an accelerated multi-CCP model if the exchange or platform so wishes. (See article, “EuroCCP and SIX x-clear Break New Ground on Interoperability”)
Chan and Neil Henderson, DTCC managing director, Product Management for EuroCCP, along with their SIX x-clear counterparts, traveled to Stockholm in mid-May to meet with NASDAQ OMX officials and regional dealers to discuss next steps for getting the multi-CCP model up and running.
“Everyone at EuroCCP is eager to launch operations in this market,” said Chan, “so the sooner we can get started, the better for customers in the Nordic region.”
Boosting competitiveness
NASDAQ officials have recognized that a multiple-CCP model will contribute to the long-term competitiveness of NASDAQ OMX Nordic Markets. “Through these agreements, we are acting on our outlined strategy to increase market liquidity by building an open, competitive CCP model in the Nordics,” said NASDAQ OMX Nordic President Hans-Ole Jochumsen in a statement. “The ability to choose a CCP will allow price and service advantages to our customers, and ultimately drive trading velocity on our Nordic markets.”
NASDAQ OMX aims to launch mandatory CCP clearing on its Nordic markets on October 9, 2009. The launch of competitive clearing will be conditional on the establishment of appropriate interoperability arrangements between EMCF and SIX x-clear and EuroCCP.
SIX x-clear acts as the CCP for SIX Swiss Exchange Ltd and London Stock Exchange (jointly with LCH.Clearnet Ltd. at present) and is in charge of risk management within the Securities Services division of SIX Group. SIX x-clear is licensed as a bank under Swiss law and enjoys the status of a Recognised Overseas Clearing House in the U.K.
Marco Strimer, CEO of SIX x-clear, said in a statement, “We are pleased to enter this agreement with NASDAQ OMX as it continues our philosophy of interoperability and competition. This, we believe, provides participants with greater choice and creates a more efficient and cost-effective post-trade infrastructure bringing benefits to all.” @