Turquoise is being set up by Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, Merrill Lynch, Morgan Stanley and UBS to compete head-to-head with domestic stock exchanges in Europe - in particular the LSE - following the introduction of the EU's Markets in Financial Instruments Directive (MiFID).

Under the new agreement EuroCCP (European Central Counterparty Ltd) will provide all clearing, settlement and risk management services to Turquoise, while Citi's global transaction services business will serve as settlement agent.

EuroCCP will act as the central counterparty and will provide netting, enable anonymous post-trade processing and risk management services. Positions will then be passed to Citi's global transaction services business for settlement in the respective central securities depositories.

In a statement a spokeman for Project Turquoise says: "Our agreement with EuroCCP will deliver the quantum leap that the market place needs. It gives us immediate economies of scale through the use of the existing infrastructure of its parent company. Their combination with Citi's global transaction services business will ensure the best single cross-border settlement network in Europe."

Commenting on the deal, Clive Triance, COO, securities and fund services, EMEA, Citi, says: "Citi has settlement capabilities in over 80 markets globally, including all the European markets covered by Turquoise. Our established relationships with the European central securities depositories will ensure local settlement efficiency."

The DTCC says EuroCCP will be a UK Recognised Clearing House (RCH), headquartered in London, and it is in the process of filing an application with the Financial Services Authority (FSA) to receive such recognition in time for the Turquoise launch date.

Although EuroCCP has now been selected to provide clearing and settlement services the Project Turquoise consortium are still searching for a platform supplier.

Reports surfaced earlier this year that the group had seen a number of suppliers including virt-X, the Hong Kong Stock Exchange and Plus Markets, but no decision has yet been made.

Earlier this week Interagency broker Instinet said its new pan-European MiFID-compliant equity alternative trading system (ATS) Chi-X was in live production for the trading, clearing and settlement of Dutch and German stocks. Instinet says the system, which will begin trading the component stocks of the FTSE 100 index by the end of Q2, is the first to offer trading and clearing services that completely bypass Europe's existing exchanges.