by Bari Trontz
Europe needs an effective clearing solution that enables trading firms to have the opportunity to select a central counterparty [CCP] best suited to their needs. I’m confident trading volumes will explode once we implement a solution for trading firms to move freely among CCPs," said Diana Chan, EuroCCP’s CEO, during a panel discussion at TradeTech’s 2010 Equity Trading and Technology Summit.
ndash; Tony Shaw, head of the UK Team at SIX Swiss Exchange, and Diana Chan, CEO of EuroCCP.
Held at the Excel Centre in London on April 21 and 22, the 11th annual TradeTech conference attracted more than 1,600 senior buy- and sellside traders, along with executives from trading technology providers, exchanges and multilateral trading facilities (MTFs). Topics addressed and debated included the world economic crisis, the future of securities markets and the role of exchanges in a changing global marketplace.
Adam Shaw, presenter for BBC’s Radio 4, moderated the panel discussion titled "Looking into the Future of the European Trading Venues," which focused on the impact of a fragmented trading landscape on market participants. Together with Chan on the panel were Bradley Duke, managing director and European Head at Knight Direct; Charlotte Crosswell, president of Nasdaq OMX Europe; and Tony Shaw, head of the UK Team at SIX Swiss Exchange.
The hot discussion topic was how interoperability among CCPs, which will enable trading firms to choose the same CCP to clear their trades on all venues, could foster volume growth in Europe. Panelists suggested that higher volume would enable Europe to sustain more trading venues from which investors could choose, thus encouraging the type of competition that can lower transaction costs.
Panelists also noted that European equity market participants want the benefit of having their clearing activities consolidated at their central counterparty (CCP) of choice. Chan stated that clearing in Europe needs to be "democratized." She added that investors should be able to choose the clearer they want, "unlike the current scenario in which a CCP is selected by the trading venue. The complexity and high cost of having to connect to multiple CCPs has a negative impact on trading volume."
"If post-trade clearing costs go down, it will encourage trading volume," commented Knight Direct’s Duke. Panelists agreed that costs have increased because investors need to connect to multiple clearing providers. While the largest customers can easily connect to all trading venues and CCPs, the smaller firms are handcuffed because of the costs required to operate on multiple platforms. This results in reduced competition, higher costs and, ultimately, lower trading volume across the board.
SIX Swiss Exchange’s Shaw suggested that substantial savings could be achieved through interoperability as "it clearly works if you want choice." @