DTCC subsidiary European Central Counterparty (EuroCCP) is to extend its footprint to Spain next month, as it provides clearing and settlement support for the next stage in the expansion of the bank-backed Turquoise trading platform.
EuroCCP began full operations in September 2008 with about 1,300 issues in 13 markets, and added equities from Italy in October 2008.
Currently, all bargains handled by EuroCCP are traded over Turquoise - which is claiming a six per cent market share in the 310 equity stocks available on its public book - but EuroCCP is expected to begin work with two other trading platforms which are expected to begin operations this quarter. Those include SmartPool, which is being established by Nyse Euronext, HSBC, BNP Paribas and JPMorgan Chase, and Nyse Arca Europe's high frequency Octopus facility.
Diana Chan, CEO of EuroCCP, says the move into Spain marks the next stage in the firm's aggressive expansion into European markets.
"In addition to our expansion to Spain, we are looking at processing for other European markets in the coming year," she says. "We are also in active talks regarding providing central counterparty services for securities lending and borrowing. All in all, 2009 is already shaping up to be a busy year."
Tabb analyst Miranda Mizen says that there will soon be too many CCPs competing for approximately six million trades per day.
Without economies of scale, the limits of the market and pressure on cost make competition unprofitable, she says, which is why CCPs need to consolidate into no more than three clearing houses that can offer sufficient breadth and depth of services and economies to a wide range of members.
"Clearing is a volume game and CCPs need to create economies of scale and diversification across markets and industries to leverage common platforms and create multiple revenue streams," states Mizen. "This is only possible through consolidation of CCP services into larger, more diverse companies that reach across borders."