A central counterparty (CCP) service for matching and clearing hedge fund pan-European equity trades has executed its first trade with prime broker and executing broker Credit Suisse, and hedge fund manager Citadel.
The service, a partnership between Omgeo and EuroCCP, is based on Omgeos Central Trade Manager (Omgeo CTM), which services trades from execution through to settlement, and EuroCCPs CCP service which clears and settles pan-European cash equity trades.
Omgeo and EuroCCP announced the partnership in June 2009.
Hedge funds will access the service through Omgeo CTM and through their executing and prime brokers who are EuroCCP participants. These brokers will authorise locked-in trades and release them to EuroCCP, where the trades are novated, netted and routed to the relevant European central securities depository for settlement on a netted basis.
Omgeos CTM has had a number of firsts in recent months. Daiwa Securities Capital Markets recently became the first broker to go live with Omgeo CTM in Japan, and in June UBS became the first client globally to use Omgeo CTMs new event based push technology that aims to make broker/dealers and investment managers proactively aware of any changes to their trade details or statuses that may impact trade processing.
Regarding Omgeos and EuroCCPs new service, Neil Martin, managing director, Cash Securities Clearing & Settlement, Credit Suisse, said: Adding central counterparty netting to the trade processing flow between us and our clients enables us to reduce counterparty risk and improve operational efficiency.
Todd Schroeder, deputy head of global operations at Omnium, an affiliate of Citadel, said: Having access to the benefits of a CCP solution and the trade guarantee it provides is of great value to hedge funds and investment managers. The ability to provide efficient straight-through processing coupled with a greater degree of risk mitigation for our clients is of utmost importance to Citadel and having this new service available to us in the marketplace is a major step in effectively meeting those needs.
Bothe Omgeo and EuroCCP are owned by DTCC, the U.S. post trade services giant.
The drive to reduce counterparty risk by using CCPs has increased in recent months. In September SWIFT launched its central matching service for confirmation messages to central clearing counterparties (CCP). Accord for Securities, which matches both treasury and equity confirmations, has established direct links to EuroCCP, SIX x-clear and LCH.Clearnet.
At the time Frank Versmessen, head of post-trade services at SWIFT, said the motive for the link came from the existing users of SWIFT Accord: They wanted to benefit from clearing, novation to reduce counterparty risk, and netting to reduce settlement volumes.