European Central Counterparty Limited (EuroCCP) is expected to launch on Friday with 15 firms having gained approval as clearing participants, including the nine founding members of Turquoise and six other firms.
The nine Turquoise founding firms are Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, Merrill Lynch, Citi, UBS, BNP Paribas and Société Générale. The other participants of EuroCCP are ABN Amro, Barclays Capital, Crédit Agricole Cheuvreux, Instinet, KAS Bank and Lehman Brothers. Of the 15 firms, six will be general clearing participants who will be able to clear and settle trades for about 35 trading firms who are not participants of EuroCCP. The others are individual clearing participants who only clear and settle trades they execute.
"The upcoming launch with these 15 firms marks a key milestone in the development of EuroCCP," said Diana Chan, chief executive officer of EuroCCP. "They make up a significant portion of the equity trading community in Europe. We are also continuing to work with a number of other firms as they complete the requirements for participation, and we expect to announce additional individual and general clearing participants in the coming weeks."
Because EuroCCP guarantees trades for its participants, the process of bringing on new participants involves an extensive review of potential firms to ensure they can meet their settlement obligations. As a participant of EuroCCP, firms are required to meet rigorous financial requirements, including minimum levels of capital and financial performance standards. After being approved by EuroCCP risk and participation departments, each prospective participant firm must also be reviewed and approved by a committee of the board of directors as well. Participant firms are required to put up collateral with EuroCCP that can be used in the event a participant firm is unable to fulfill its settlement obligations. Collateral can be cash, securities or letters of credit. The level of collateral is adjusted on a daily basis.
In July, EuroCCP completed the final stages of testing with the Turquoise trading platform and a number of participant firms prior to a limited trading that will begin on 15 August. By 5 September, when the Turquoise trading platform is scheduled to go live in full production, EuroCCP expects to be clearing and settling trades in 1,300 equity issues across 13 European markets in seven different currencies. Ultimately, EuroCCP expects to provide clearing and settlement services in more than 20 separate markets in Europe.
"MiFID and the Code of Conduct have been successful in unleashing competitive market forces and providing pricing transparency," said Chan. "Since the European authorities announced their intention to allow new entrants for trading and clearing securities, established markets and central counterparties have slashed their fee structures -- and more can be expected.
"We are committed to leading the way by being the low-cost, pan-European clearing and settlement provider to multilateral trading facilities (MTFs) as well as exchanges, offering them unparalleled efficiency, capacity, safety and business resiliency," she said.
