The two largest pan-European cash equities clearing houses, EMCF and EuroCCP, will combine forces to create a new clearing house for cash equities in the pan-European market place. The new entity, to be called EuroCCP, will provide best practices in the areas of risk management, technology, settlement and client service, said a joint press release.
Current owners of EMCF ABN Amro Clearing Bank and NASDAQ OMX and current owner of EuroCCP The Depository Trust & Clearing Corporation (DTCC) along with BATS Chi-X Europe will become equal shareholders in the new combined clearinghouse.
Upon execution of the definitive agreements, the transaction is expected to complete if the necessary regulatory approvals are received.
The new CCP will use the risk management framework and customer-service organization of EuroCCP, and it will run on the technology and operations infrastructure of EMCF. The new entity is planned to be headquartered in Amsterdam, with client-facing functions located in London and Nordic coverage provided from Stockholm.
Diana Chan, CEO, EuroCCP will be appointed as CEO of the new entity and Jan Booij, CEO, EMCF as COO of the new entity, subject to regulatory approval.
Commenting on the transaction, Diana Chan, CEO, EuroCCP: Bringing together EMCF and EuroCCP reflects the desire of many market participants to see sustained competition, consolidation and greater efficiencies in European clearing and post-trade processing.
The new entity is expected to deliver reduced settlement cost savings resulting from increased settlement netting and reduced inter-CCP settlements, reduced collateral obligations as a result of portfolio margining and a single guarantee fund, removal of one set of membership fees, improved information technology and lower connectivity expenses.
EuroCCPs Supervisory Board will consist of representatives from ABN AMRO Clearing Bank, BATS Chi-X Europe, DTCC and NASDAQ OMX plus independent directors, providing a broad and balanced representation of the market place, said a joint press release. No single shareholder or group of shareholders will have overriding control.
Jan Booij, CEO, EMCF said: This is not only a transformational initiative for EMCF and EuroCCP but for the industry. It will enable us to provide more flexible and innovative clearing services to all clients, while our sustainable business model will ensure costs are kept low and will provide the very best in risk management, technology, settlement and client service.
Diana Chan, CEO, EuroCCP said: The new CCP will lead the way in encouraging greater competition between all cash equity clearing houses while driving down costs. Following the launch of four-way interoperability, the industry must now consolidate in Europe to achieve economies of scale and respond to the changing needs of market participants. Combining our organizations will accomplish this.
(JDC)