European Central Counterparty Limited (EuroCCP), the European subsidiary of The Depository Trust & Clearing Corporation (DTCC) says it is ready to step into the breach and provide clearing services for European MTFs such as Chi-X, Nasdaq OMX, Bats and other new execution venues served by troubled Belgian bank Fortis.
EuroCCP is looking to take advantage of the troubles afflicting Fortis, which this morning was the subject of a €11.2 billion rescue from the governments of Belgium, the Netherlands and Luxembourg after investor confidence in the bank evaporated last week.
EuroCCP believes the bank's problems will hit confidence in the stability of Fortis Bank's European Multilateral Clearing Facility (EMCF), which currently acts as the central counterparty for Chi-X and Nasdaq/OMX and the soon-to-be-launched Bats venture.
It points out that the risk to clearing members is that the cash collateral given to the CCP is exposed to the failure of the bank parent. Securities given to a bank as collateral, even if they could be reclaimed, could be temporarily frozen if the bank goes into administration or liquidation.
"The market needs...an independent, focused central counterparty that is properly managed as befits a critical market infrastructure." says Diana Chan, EuroCCP chief.
EuroCCP, which is governed by a board of directors comprised of nine major global and European financial institutions, three public interest directors and two management representatives, currently supports the SmartPool MTF and Turquoise.
Trevor Spanner, chief operating officer of EuroCCP says the platform has the capacity to process up to 280 million sides of trades daily. "The combined volume of all European stock exchanges and MTFs is less than 10 million sides," he says.