PostTrade 360°: Equity clearing market is open and competitive
09 September 2024 Sweden
Image: Daniel_Tison
Competition and interoperability were the main themes shaping the panel discussion called ‘Hear it from the players: the equities clearing market panel’ at PostTrade 360° Nordic 2024 in Stockholm.
Representatives from three central counterparties (CCPs) discussed the current state and future perspectives of cash equity clearing in Europe.
Tim Beckwith, head of commercial and business development at Cboe Clear Europe, said: “We've seen competitive behaviour between CCPs really intensify, which is great for the industry, this competition.
“The equity clearing market is open and competitive, and we need to make sure it stays that way.”
Another panellist agreed that competition is a good thing, which has led to the reevaluation of interoperability.
According to Beckwith, about 75 per cent of European cash equity trading is interoperable, which is a “fantastic achievement”, while about 20 per cent is under “preferred clearing”.
“We think there needs to be growth,” he said. “We prefer to see those preferred markets become interoperable, but you also need to plug the gap as well.”
Regarding interoperability, the panel referenced Spain, which, according to one panellist, is currently not an interoperable trading venue, but that may change with the implementation of the Alternative Investment Fund Managers Directive (AIFMD) Level 2 regulation.
On the other hand, Ivan Gilmore, head of cash equities at the London Stock Exchange Group (LSEG) Post Trade, said that the market competition might have gone “too far”, especially in terms of customer expectations.
He said: “As volumes went up, customers have expected us to lower fees. However, as volumes have come down over the last couple of years, we’ve not been able to increase those fees.”
Speaking of volumes, Beckwith added: “You either get more volume via winning business off each other, which is the competition part, or through new venues, whether it is preferred clearing or someone that’s not done anything yet.”
The panel emphasised the need for continued innovation and collaboration among CCPs to maintain stability and efficiency.
As the clearing market is opening up, each panellist spotted different benefits.
Gilmore said: “More and more of the interoperable venues are starting to trade crypto exchange traded products (ETPs). It’s very small at the moment, but it could grow a lot over the next few years, starting with Bitcoin and Ethereum.”
Beckwith said: “We also see new venues that are not in clearing. That seems to be the latest trend at the moment, and maybe that’s where the CCPs will get a bit more revenue from.”
Representatives from three central counterparties (CCPs) discussed the current state and future perspectives of cash equity clearing in Europe.
Tim Beckwith, head of commercial and business development at Cboe Clear Europe, said: “We've seen competitive behaviour between CCPs really intensify, which is great for the industry, this competition.
“The equity clearing market is open and competitive, and we need to make sure it stays that way.”
Another panellist agreed that competition is a good thing, which has led to the reevaluation of interoperability.
According to Beckwith, about 75 per cent of European cash equity trading is interoperable, which is a “fantastic achievement”, while about 20 per cent is under “preferred clearing”.
“We think there needs to be growth,” he said. “We prefer to see those preferred markets become interoperable, but you also need to plug the gap as well.”
Regarding interoperability, the panel referenced Spain, which, according to one panellist, is currently not an interoperable trading venue, but that may change with the implementation of the Alternative Investment Fund Managers Directive (AIFMD) Level 2 regulation.
On the other hand, Ivan Gilmore, head of cash equities at the London Stock Exchange Group (LSEG) Post Trade, said that the market competition might have gone “too far”, especially in terms of customer expectations.
He said: “As volumes went up, customers have expected us to lower fees. However, as volumes have come down over the last couple of years, we’ve not been able to increase those fees.”
Speaking of volumes, Beckwith added: “You either get more volume via winning business off each other, which is the competition part, or through new venues, whether it is preferred clearing or someone that’s not done anything yet.”
The panel emphasised the need for continued innovation and collaboration among CCPs to maintain stability and efficiency.
As the clearing market is opening up, each panellist spotted different benefits.
Gilmore said: “More and more of the interoperable venues are starting to trade crypto exchange traded products (ETPs). It’s very small at the moment, but it could grow a lot over the next few years, starting with Bitcoin and Ethereum.”
Beckwith said: “We also see new venues that are not in clearing. That seems to be the latest trend at the moment, and maybe that’s where the CCPs will get a bit more revenue from.”
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