European Central Counterparty Limited (EuroCCP) announced that it has begun clearing for the Nyse Arca Europe multilateral trading platform, which officially launched operations today.
NYSE Arca Europe will trade securities in 11 markets across Europe, in all of which EuroCCP already provides clearing and settlement services. EuroCCP has also been clearing since February for NYSE Euronext's SmartPool platform, a new exchange-led, European dark pool for block trading owned by NYSE Euronext, HSBC, BNP Paribas and J.P. Morgan.
EuroCCP currently provides clearing and settlement services on a pan-European basis in 15 major national markets in Europe, including Austria, Belgium, France, Denmark, Germany, Ireland, Italy, Finland, Netherlands, Norway, Portugal, United Kingdom, Switzerland, Sweden and Spain. Settlement through EuroCCP can be done in seven currencies: the euro, British pound, U.S. dollar, Swiss franc, Danish krone, Swedish krona, and Norwegian krone. EuroCCP entered the European clearing arena in March 2007, when it won the appointment of Turquoise, a multilateral trading facility. Turquoise started trading in August 2008.
Trades that are executed on any of the platforms EuroCCP clears for can be netted for settlement (except for the UK and Ireland) and margin purposes, thereby reducing the overall cost of clearing and settlement. EuroCCP currently nets off 99% of all transactions processed.
The incremental volumes brought to EuroCCP by NYSE Arca Europe are expected to push EuroCCP transaction volumes above the first volume discount threshold, which will result in a fee reduction for all EuroCCP clearing participants. Once a volume threshold has been surpassed, trades on any EuroCCP-supported platform by any clearing participant benefit from the volume discount.
"NYSE Arca Europe's platform is expected to attract substantial volumes from high-frequency traders," said Diana Chan, CEO of EuroCCP. "We expect that EuroCCP will offer the ideal clearing solution for such traders that will minimize their costs. EuroCCP is uniquely built for safe and low-cost clearing using an 'at-cost' model and taking advataking advantages of the expertise and economies of scale provided by our parent."
Chan also noted that as volume through EuroCCP grows, all the trading firms using any or all of the three trading platforms using EuroCCP would benefit from the cost model applied by EuroCCP. "With our clearing and settlement system, as total volume grows, the unit fees charged to all our clearing participants go down. So everyone benefits if volume goes up, no matter which platform is used to execute the trades."
In February, Chan noted that EuroCCP's volume averaged just under 385,000 transactions (or sides) daily. Unit prices are reduced to 5.25 euro cents if volume averages 400,000 or more sides for a month, and drop to 2.5 euro cents if volume climbs to 800,000 sides or more a month.