In a move hailed as a major step forward in the development of pan-European stock trading, European Central Counterparty Limited (EuroCCP) has announced that it is operationally ready to provide cross-border clearing services for Nasdaq Europe.
EuroCCP - wholly-owned by New York's Depository Trust and Clearing Corporation (DTCC) - says its service will reduce risks and costs for equity investors trading across European borders.
Michael Sanderson, Nasdaq Europe CEO, comments: "This clearing and settlement solution sweeps away the costs and bureaucracy which have always deterred European investors from investing across borders."
A central clearing counterparty eliminates counterparty risk by interposing itself between buyers and sellers of securities. The London Stock Exchange earlier this year introduced a CCP for trades conducted over the Sets order book. Nasdaq claims EuroCCP will be the first in Europe to offer a cross-border service.
Once live, EuroCCP will offer users an optional netting settlement service, allowing firms to decrease the number of trade obligations requiring settlement, helping to reduce costs and making it possible to reduce capital. It is also promising settlement at each security's home depository, where liquidity is greatest. EuroCCP says it has established connectivity to a number of key depositories in Europe and the US.
Participation in EuroCCP will be voluntary for members using Nasdaq Europe's trade reporting services. It will, however, become mandatory when the exchange launches its hybrid-market model, adding a central limit order book to the current platform.