EuroCCP starts to interoperate as Bats Europe & UBS MTF open up
EuroCCP, the pan-European cash equities clearing house, has signed up BoA Merrill Lynch, Credit Suisse, Morgan Stanley and Nomura on Bats Europe for its clearing services and Citigroup’s Global Transaction Services unit is putting its third party clearing business on UBS MTF via the London-based subsidiary of the Depository Trust & Clearing Corporation. Both deals take advantage of the fact that these trading venues have opened themselves up to competition and now support full interoperability as required under EU regulations.
The new Bats Europe Preferred Interoperable Clearing Service enables trading firms to elect a preferred CCP to clear their trades, as the four banks have done with EuroCCP. Under this service, if trading firms on both sides of a trade have selected a preferred Central Counterparty then each side will be cleared by the respective CCP of choice, which means EuroCCP will be gaining quite a bit of volume from Bats Europe but less from the UBS Multilateral Trading Facility for the foreseeable future.
Firms trading on UBS MTF, the latest fully interoperable execution venue in Europe, are able to choose EuroCCP to clear their cash equities trades as the DTCC subsidiary now interoperates with the incumbent CCP. But many other clearing houses are scrambling for this same business simultaneously, so a tough battle for volume awaits – as indeed is the case for most venues now across Europe post-MiFID and Giovannini. More such interoperable deals should be announced in the coming months.
“This represents huge progress … and we are hoping the success of these initiatives will encourage other trading venues to follow suit in implementing interoperability,” said Diana Chan, chief executive of EuroCCP. “If there is wider adoption of interoperability across more trading venues, the European equities trading landscape will be transformed and market participants will truly benefit from greater competition and lower costs.”
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