Virt-x, the pan-European blue chip equity exchange formed from the merger of SWX Swiss Exchange and Tradepoint, has finalised the structure of its central counterparty (CCP) arrangements. The move represents the first European-scale CCP for equity trading and is scheduled to be launched in summer 2002.
The structure will support two interlinked clearing counterparties: the primary cross border CCP being London Clearing House (LCH); and a new mechanism from Swiss Financial Services Group, x-clear, acting as CCP for SIS clearing members. Both will clear the full range of stock traded on virt-x.
The exchange's settlement arrangement involves three central securities depositories (Crest, SIS and Euroclear), whereby virt-x members may choose their preferred settlement venure within a low-cost, straight-through processing environment.
Antoinette Hunziker-Ebneter, virt-x CEO describes the introduction of the CCP as the "final phase" of the relaunch of the virt-x. "This integrated structure will deliver real operational and cost benefits to members," she says.
The CCP arrangment will offer anonymous trading, centrally managed counterparty credit risk, reduced costs through netting of trades, financially guaranteed settlement, streamlined access to the user's settlement location of choice, and harmony of approach to corporate actions across CSDs, says Hunziker-Ebneter.
Iain Saville, the chief executive of UK book-entry depository operator CrestCo says: "We are a strong supporter of the flexible, customer-led approach to settlement pioneered by virt-x...Their approach will make a reality of customer choice as regards settlement location - effective choice is the best way to drive down costs and improve service quality."
The virt-x blueprint contrasts with the vertically integrated trading and settlement model favoured by Deutsche Borse, Eurex and ClearStream.