London Stock Exchange connects EuroCCP to main market
The London Stock Exchange has set out plans to add European Central Counterparty as a third CCP for its main market from March 2015.
Interoperable clearing has been gradually adopted by a number of trading venues and exchanges across Europe in the last few years, in line with European Commission guidance which aims to encourage choice. The other clearers on the LSE are LCH.Clearnet and Switzerland’s SIX x-Clear.
“The addition of EuroCCP as a third provider of clearing services for trades executed on London Stock Exchange’s main electronic order book reaffirms our commitment to offering choice to its members, helping to drive efficiencies across the trading cycle,” said Nicolas Bertrand, head of equity and derivatives markets at the LSE. “The LSE first introduced interoperability between clearing providers back in 2008 and the expansion of this further confirms the Group’s unique position as a truly open-access infrastructure provider.”
In June 2014, the LSE completed the migration of its post trade feed from Euroclear UK & Ireland to the other central counterparties, bringing it in line with the model used by multilateral trading facilities. The exchange says that this has enabled members to derive benefits from cross venue netting, reducing the number of settlement obligations and ultimately fees.
The CCP model itself is designed to reduce systemic risk by centralising counterparty risk exposure and bringing together post-trade efficiencies.
“The clearing model is designed to reduce risk for multilateral netting,” said Marcus Zickwolf, chairman at the European Association of Counterparty Clearing Houses. “Compared to bilateral netting, it reduces the risk fifteen times. In this model, yes there is a centralisation of risk but you have a great systemic advantage in lower risk overall.”