Two central counter-party clearers – the London Clearing House (LCH) and SIS x-clear, the Swiss CCP – today claimed to have launched “the first truly pan-European CCP structure.” It offers participants in the virt-x trading platform with clearing and optional netting services and post-trade anonymity.
The service, which went live yesterday, links the two CCPs seamlessly, giving market participants a choice of provider without forfeiting efficiency. By the time the market closed, 28,164 trades had been cleared for settlement on Thursday 8 May.
LCH, which is understood to remain in merger discussions with Clearnet, attaches particular importance to the new service, which it sees as the precursor to a more wide-ranging standardisation and homogenisation of cross-border CCP services in Europe.
“LCH is delighted to participate in this further development of the virt-x market,” says LCH chief executive David Hardy. “This is another central counterparty service to be launched by LCH EquityClear, and further highlights the demand for a value adding CCP model for equities, that delivers anonymity, reduces operational risks and costs, provides greater security and, through netting, minimises the number and value of settlements. In addition to these well-understood benefits, our members will begin to enjoy the very considerable benefits of dealing through a single counterparty in a highly automated and increasingly homogenised manner for both cross-border and domestic trades.”
Importantly, participants also have a choice of settlement location. Trades can be settled in one of CREST, which is now owned by Euroclear, Euroclear Bank or SIS, the Swiss CSD. “The launch of the first pan-European CCP structure completes virt-x’s integrated trading, clearing and settlement model,” says Peter Keller, the virt-x CEO. “The integrated straight through processing environment further simplifies the process of trading securities cross border and will deliver real operational, risk and cost benefits to members.”
However, the congratulations should not be overdone. The virt-x platform has found its ambition of becoming a genuine pan-European trading platform hard to realise, and the bulk of activity on it is now confined to Swiss blue chips. Indeed, virt-X is now owned exclusively by SWX, the Swiss Exchange, which bought out the Tradepoint shareholders – and is therefore subsumed in the broader strategy of the Swiss financial services industry. “The establishment of SIS x-clear as a CCP for virt-x marks an important milestone in the further development of the Swiss-based European Value Chain, which is designed and committed to offering low-cost but highly sophisticated and automated clearing and settlement services to its domestic and international members, and providing to market participants a unique structure of free choice both for clearing and for settlement,” says Heinz Haeberli, CEO of the SIS Group.