by Judy Inosanto
EuroCCP has partnered with SWIFT’s central trade matching platform to provide prime and executing brokers central counterparty (CCP) clearing services for their over-the-counter (OTC) pan-European equity trades.
The collaboration is one of the first to offer European prime and executing brokers the benefit of a CCP protection for their OTC equity trades. EuroCCP will fulfill the obligations to settle the trade even if one party to a transaction defaults. The brokers’ operational processing and settlement flow will be streamlined through netting multiple trades in the same security into single settlement obligations.
“EuroCCP is focused on expanding the reach of its low-cost, secure clearing services in the European marketplace,” said Diana Chan, CEO of EuroCCP. “We are excited that through this innovative connection with SWIFT, prime and executing brokers can now benefit from risk mitigation, operational efficiency and trade guarantees for their off-exchange equity transactions.”
How the service works
Prime and executing broker customers supported by EuroCCP will be able to specify which of their matched OTC transactions will be sent for clearing.
SWIFT’s Accord for Securities will communicate trade details in real time to EuroCCP through its network. EuroCCP will net all trades done by a broker in the same security into a single settlement obligation and settle the transactions in the relevant central securities depository.
Brokers will be able to have all their off-exchange transactions not only netted together but also netted with any other transactions in the same security executed on the trading platforms supported by EuroCCP. EuroCCP’s highly automated post-trade process will help brokers mitigate their operational risks and significantly cut down their processing costs.
“This initiative will transform Accord for Securities into an industry infrastructure that enables centralized settlement flows and will significantly reduce costs and risks,” added Alain Raes, SWIFT’s chief executive, EMEA. “We are delighted to already have EuroCCP, SIX x-clear and LCH Clearnet on board and we are keen to bring on additional CCPs in the future to give our customers the widest possible choice of CCPs they want to reach over SWIFT.”
The launch of this service is subject to regulatory approval. @