EuroCCP has introduced a monthly billing feature that allows clients to aggregate trading, clearing and settlement costs.
Speaking to GC.com, Andrew Simpson, head of product management, EuroCPP, explained that the current tiered pricing model used by CCPs makes it difficult for investment banks and broker/dealers to asses cost. The new feature from EuroCCP aggregates trading, clearing and settlement costs into basis points consistent with fees charged by trading venues on the value of trade executions.
Measuring the cost of trading in basis points enables trading costs to be introduced to smart order routers, the trading hub that decides which venue to use to trade.
By providing value in basis points, clients can analyse which CCP is more cost efficient, allowing traders to preprogram their smart order routers to take advantage of this new information, explains Simpson. “It gives the ability to examine the trade life-cycle to see where the emphasis of cost lies.”
The demand for the new pricing system came primarily from UBS, who wanted the use of basis points to estimate the overall cost.
Robert Barnes, Managing Director, Equities, at UBS Investment Bank commented, Cost-per-ticket trends are subject to bias, for example as electronic trade sizes shrink. By adding value processed on its invoices, EuroCCP enables basis-point comparability, a more meaningful metric for competitive landscape cost analysis.