Equity markets: Clearing the way for integration
More efficiency in clearing will help increase the importance of Europe’s equity markets.
The difficulties and high costs of cross-border clearing arrangements have long been cited as among the principal barriers to more efficient cash equities trading in the EU.
But a number of developments show that competition and real change in clearing have put down strong roots.
Users of the London Stock Exchange will soon be able to choose between two clearing providers, LCH Clearnet and SIS X-clear, part of the mutually owned SWX group, for the clearing of their trades on the exchange. Such competition, which will be a first, is expected to lead to lower clearing costs.
Instinet Chi-X, the pan-European multilateral trading facility, which began full operation this April, announced that it will also offer users a choice of clearing provider. Users will be able to choose between innovative pan-European clearing solutions from two banks, Fortis and BNP Paribas.
Another significant development is the choice of the DTCC as the clearing and settlement partner for the Project Turquoise MTF, which is being put together by seven large investment banks as a mutually owned alternative to Europe’s major exchanges. The entrance of the DTCC, the user-owned body that is the dominant clearing and settlement company in the US, gives a powerful new player a foothold in Europe.