Brexit means EuroCCP may follow clients to the Continent

Diana Chan

EuroCCP, which has been headquartered in Amsterdam since its 2013 merger with Dutch clearer EMCF, already has additional offices in London and Stockholm.

Diana Chan, its chief executive, said it might also establish a client office in France when it starts clearing trades for Euronext – the exchange group that signed a definitive agreement to acquire a 20% stake in EuroCCP for roughly €14 million on August 17 – as well as other sites if needed.

Chan said: “In the event that a significant number of clients leave London and move to a new location, we may put people in that location.”

As FN reported in June, London-based Bats Europe, the largest stock exchange in Europe and a shareholder in EuroCCP, is “highly likely” to set up in the eurozone if the uncertainty about the outcome of the UK’s vote to leave the EU persists, though it would retain a London office.

From a regulatory perspective, EuroCCP might also need to be authorised by UK regulators to clear for platforms in the country once it has left the EU, Chan added.

“Ideally there would be grandfathering for CCPs that already clear for UK platforms, but there is also the possibility that we need to go through a new authorisation process. That will take time and effort but we will manage it”.

Grandfathering, under which exemptions are granted from new laws or regulations, could provide respite for EuroCCP and other clearing houses that are based on the continent and clear for UK entities.

The issue has arisen because Brexit has put into doubt the future of passporting rights, under which financial services firms are able to do business across the rest of the bloc without having to seek approval in each individual member state.

It is particularly problematic for EuroCCP, given its Dutch oversight and the fact that the venues and brokers it provides clearing services for are located throughout the UK and Europe.

Speaking about Euronext’s agreement to take a stake in EuroCCP, Chan said the move makes the clearing house a truly “shared infrastructure”.

Euronext, which currently relies on the services of LCH.Clearnet to clear its equity trades, said the deal would enable it to offer its users to benefit from greater choice over their clearing provider “in due course”.

“Bringing in Euronext and its commitment to competitive clearing means we will be able to access over 80% of Europe’s equities market and help to reduce post-trade costs in Europe,” Chan added.

Euronext has become the fifth shareholder in EuroCCP, joining ABN Amro Clearing Bank, Bats Europe, Nasdaq and The Depository Trust and Clearing Corporation. The clearing house’s owners span the trading chain, from clearing member to exchange and post-trade.

The existing four shareholders each had held a 25% stake in EuroCCP, but the addition of Euronext will see their stakes dilute by five percentage points. In May, when Euronext first said it had entered exclusive talks to become a shareholder, Stéphane Boujnah, chairman and CEO of the managing board of Euronext, had said the move would reduce the “frictional costs” of trading on its equity markets.

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