PostTrade 360掳: 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 鈥楬ear it from the players: the equities clearing market panel鈥� at PostTrade 360掳 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: 鈥淲e've seen competitive behaviour between CCPs really intensify, which is great for the industry, this competition.
鈥淭he equity clearing market is open and competitive, and we need to make sure it stays that way.鈥�
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 鈥渇antastic achievement鈥�, while about 20 per cent is under 鈥減referred clearing鈥�.
鈥淲e think there needs to be growth,鈥� he said. 鈥淲e prefer to see those preferred markets become interoperable, but you also need to plug the gap as well.鈥�
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 鈥渢oo far鈥�, especially in terms of customer expectations.
He said: 鈥淎s volumes went up, customers have expected us to lower fees. However, as volumes have come down over the last couple of years, we鈥檝e not been able to increase those fees.鈥�
Speaking of volumes, Beckwith added: 鈥淵ou 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鈥檚 not done anything yet.鈥�
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: 鈥淢ore and more of the interoperable venues are starting to trade crypto exchange traded products (ETPs). It鈥檚 very small at the moment, but it could grow a lot over the next few years, starting with Bitcoin and Ethereum.鈥�
Beckwith said: 鈥淲e also see new venues that are not in clearing. That seems to be the latest trend at the moment, and maybe that鈥檚 where the CCPs will get a bit more revenue from.鈥�
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: 鈥淲e've seen competitive behaviour between CCPs really intensify, which is great for the industry, this competition.
鈥淭he equity clearing market is open and competitive, and we need to make sure it stays that way.鈥�
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 鈥渇antastic achievement鈥�, while about 20 per cent is under 鈥減referred clearing鈥�.
鈥淲e think there needs to be growth,鈥� he said. 鈥淲e prefer to see those preferred markets become interoperable, but you also need to plug the gap as well.鈥�
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 鈥渢oo far鈥�, especially in terms of customer expectations.
He said: 鈥淎s volumes went up, customers have expected us to lower fees. However, as volumes have come down over the last couple of years, we鈥檝e not been able to increase those fees.鈥�
Speaking of volumes, Beckwith added: 鈥淵ou 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鈥檚 not done anything yet.鈥�
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: 鈥淢ore and more of the interoperable venues are starting to trade crypto exchange traded products (ETPs). It鈥檚 very small at the moment, but it could grow a lot over the next few years, starting with Bitcoin and Ethereum.鈥�
Beckwith said: 鈥淲e also see new venues that are not in clearing. That seems to be the latest trend at the moment, and maybe that鈥檚 where the CCPs will get a bit more revenue from.鈥�
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