CLEARING: EuroCCP Set to Clear London Stock Exchange Trades

Buyers and sellers on the London Stock Exchange (LSE) just got more choice when it comes to clearing their equity trades.

The European Central Counterparty N.V. (EuroCCP) announced that it will be clearing trades executed on LSE at the direction of the execution party.

Firms using EuroCCP to clear U.K. equities trades executed on Aquis, BATS Chi-X, Equiduct, GETMatched, Sigma-X, SmartPool, Turquoise and UBS MTF will be able to direct LSE trades to EuroCCP. Furthermore, with the new competition for clearing, EuroCCP said in a release that users can save “at least 50 percent” on settlement costs. This is achieved by cross-platform netting by EuroCCP, whereby all trades in the same U.K. stock, regardless of where they are executed, can be netted with LSE trades into one single settlement obligation.

“Many market participants have been waiting to have more choice in where they clear trades executed on London Stock Exchange,” said Diana Chan, chief executive of EuroCCP. “The addition of EuroCCP to the central counterparties already available will bring the benefits of more competition together with reduced costs.”

EuroCCP will start clearing LSE trades after legal, connectivity and operational arrangements have been finalized among the relevant parties and regulatory approvals have been received. Interoperability arrangements are already in place between EuroCCP and the incumbent clearers for LSE, LCH.Clearnet Ltd. and SIX x-clear AG.

Cross-platform netting of U.K. equities by CCPs has been possible since 2013 for trades executed on multilateral trading facilities and it is expected that LSE trades can also be cross-platform netted starting in Q3 2014.

In April, EuroCCP became the first authorized CCP for equities under the European Market Infrastructure Regulation (EMIR). EuroCCP’s risk management framework, operating model and technology meet the safety standards required by EMIR.