The SWX CCP service will be an extension of the current virt-x model. The decision to introduce this service has been made in consultation with members of SWX both in Switzerland and internationally with the aim of standardising post trade processing and maximising efficiency. A central counterparty is a specialised clearing institution that facilitates securities trading by standing between buyers and sellers to ensure that money and securities change hands smoothly and efficiently, with minimum counterparty risk.
The key drivers and benefits supporting the introduction are: Standardised processing for members which translates into lower operating costs and greater efficiency. Reduction of risk through transparent risk management practices, with risk allocation managed and priced by the CCP providers giving reduced counterparty credit risk and optional multilateral netting, all resulting in reduced systemic risk. Improved settlement efficiency and potentially improved liquidity. The formation of holistic clearing tariff structures supporting both SWX and virt-x activity. Release of capital from existing default frameworks. Other benefits such as increased resilience to the market during a crisis when replacement costs may increase sharply.
It is expected that the project will be implemented during the second half of 2006, subject to relevant formal and regulatory approvals. A comprehensive implementation plan will be provided to members in the coming weeks.
In May 2003, virt-x together with LCH.Clearnet Ltd and SIS x-clear AG successfully introduced the first pan-European Central Counterparty Service (CCP) for cross-border trading. Each member chooses which CCP they will use accross the product range.
Both LCH.Clearnet Ltd and SIS x-clear AG stand as Central Counterparties to their members, offering full clearing services across all eligible virt-x traded securities. The inter-operation for trades resulting from orders matched between members of LCH.Clearnet Ltd or SIS x-clear AG is achieved by the CCP's operating accounts with each other.
Jürg Spillmann, Head of the SWX Group Executive Committee, said, "Given the positive experience with the CCP Service in virt-x, we are pleased to roll it out across SWX Swiss Exchange as well. We are convinced that we thereby add significant value to the Swiss Financial Market."
