European Central Counterparty Ltd. (EuroCCP) announced today that it received approval as a U.K. Recognised Clearing House (RCH) by the Financial Services Authority (FSA), solidifying its position as a competitive, low cost alternative for clearing and settlement in Europe.
“We are delighted that the FSA has granted EuroCCP status as a U.K. Recognised Clearing House,” said Diana Chan, chief executive officer, EuroCCP. “Initiatives such as MiFid and the Code of Conduct are changing the landscape in Europe and allowing new service providers such as EuroCCP to help market participants further reduce transaction costs, improve efficiency and connect more seamlessly in today’s market place.”
EuroCCP was selected to clear and settle for Turquoise, a new pan-european multilateral trading facility (MTF) created by a consortium of nine major global investment banks that will trade the most liquid equities in Europe. EuroCCP will use Citi’s Global Transaction Services as its settlement agent.
“We believe the value that our ‘at-cost’, industry-governed business model will be attractive to European capital markets and their participants,” said Chan. “EuroCCP is already in active discussions with other MTF trading platforms to provide clearing and settlement services.”
EuroCCP reaffirms its commitment to sign the voluntary European Code of Conduct for clearing and settlement, allowing for interoperability of its services with other clearing and settlement houses and European trading platforms.
The FSA approval of EuroCCP as a Recognised Clearing House followed a satisfactory in-depth review of all aspects of EuroCCP’s business arrangements as a critical market infrastructure.
Earlier in 2008, EuroCCP announced the selection of a 13-member Board of Directors to govern its operations. The new slate of directors includes three independent directors from the industry, two management representatives and eight representatives from participant organizations: Deutsche Bank, Goldman Sachs, Merrill Lynch, Citi, UBS, BNP Paribas, Credit Suisse, Morgan Stanley. The three independent directors are Edouard-François de Lencquesaing (former head of transaction banking and IT at Crédit Commercial de France), Iain Saville (former Chief Executive of CRESTCo Ltd.) and Derek Ross (former Partner at Deloitte U.K.).
How EuroCCP Will Work
EuroCCP will accept trades from the Turquoise and other trading platforms. EuroCCP will guarantee trades upon receipt and validation, then net all transactions on all platforms in the same security into one amount for settlement per clearing participant. For trading firms that are not clearing participants of EuroCCP, these trades will be handled through general clearing participant relationships.
EuroCCP will apply risk-based margining, with appropriate levels of margin collected on a daily basis. Any unsettled obligations will be marked-to-market each day.
Citi will process EuroCCP’s settlement instructions for delivering and receiving securities and related payments in various currencies through its local securities network at various national Central Securities Depositories. Clearing participants do not need to change their settlement arrangements with existing settlement service providers.
EuroCCP is headquartered in London. It will be operated on an “at-cost” basis, and any excess revenues collected beyond the cost to support the operation will be refunded to participants.
