EuroCCP Presents Interoperability White Paper to the Market
The opportunity to discuss the challenges of implementing interoperability between equities central counterparties (CCPs) in Europe drew a standing-room-only crowd to a roundtable event organized by EuroCCP on January 14. How to implement multi-CCP interoperability in ways that reduce its risks and complexities has been a central topic for market participants in recent months and prompted European securities regulators to put interoperability arrangements on hold in late 2009 while they studied the issue.
EuroCCP has taken a leading role in the interoperability debate, with the publication of its white paper, “Recommendations for Reducing Risks Among Interoperating CCPs,” followed by the roundtable. The event gave attendees an in-depth presentation of EuroCCP’s views on the risks of interoperability and the measures it recommends for mitigating these risks.
Promoting dialogue
The invited group of EuroCCP participants, prospects and representatives of trading platforms gathered at London’s Andaz Hotel, where they were greeted by EuroCCP’s head of Product Management in London, Andrew Simpson.
“Today’s strong turnout shows the importance all of you put on the issue of interoperability,” Simpson said to the crowd. “Working through the challenges of interoperability is the only way we’ll realize the benefits of competition.”
The white paper grew out of extensive consultation with market participants, Simpson said, and represents EuroCCP’s contribution to a solution that can move the industry forward. “By engaging all of you today, we want to continue that dialogue,” he told the group.
Fresh ideas
Following Simpson’s opening remarks, Diana Chan, CEO of EuroCCP, walked the audience through a presentation of the key challenges of interoperability and EuroCCP’s white paper recommendations. (See the January issue of @dtcc for additional information on the white paper.)
EuroCCP roundtable (left to right): EuroCCP’s COO Trevor Spanner, CEO Diana Chan and Head of Risk Management Bhagwant Singh
With this paper, Chan said, EuroCCP aims to offer some fresh ideas on important risk management issues and on ways to make interoperability safer and easier for market participants throughout Europe.
“What we’re trying to achieve is the market structure for tomorrow,” said Chan. “Competitive trading is here to stay. In the future, the market structure should allow firms to trade on any platform they wish and to use the CCP of their choice – which can only be achieved if all CCPs interoperate and platforms give their trade feeds to all the CCPs that request them.”
The morning event concluded with an hour-long panel discussion and audience Q&A. Two EuroCCP executives, COO Trevor Spanner and head of Risk Management Bhagwant Singh, joined Chan on the panel and responded to audience questions. Topics covered included the implementation specifics of EuroCCP’s number-one recommendation – that CCPs augment their existing default funds, rather than employ inter-CCP margining, to cover potential close-out losses in the event of an interoperating CCP’s default. There were also questions about building operational conformity among CCPs that link to a single trading platform.
To gauge audience perception, EuroCCP also conducted a mini-poll midway through the roundtable. One question asked attendees whether they believed an interoperability convention between CCPs would be beneficial. Audience support was unanimous.
For those participants who could not attend the London event, EuroCCP relationship managers have held one-on-one meetings to review the paper and answer questions about it. For further information, please contact EuroCCP Relationship Managers Rob Penn, at rpenn@euroccp.co.uk, +44 (0)207 650 1595, or Celine Dehaene, at cdehaene@euroccp.co.uk, +44 (0)207 650 1565.
If you wish to download the EuroCCP white paper, click here.