EU Trading, Clearing and Settlement: You Say You Want a Revolution?
Report Summary
EU Trading, Clearing and Settlement: You Say You Want a Revolution?
MiFID has opened the flood gates for new trading and execution venues in Europe, and the battle lines are being drawn between exchanges, MTFs and clearing houses.
Boston, MA, January 14, 2009 – A new report from Aite Group, LLC looks at the current state of European trading, clearing and settlement, as well as the changes that can be expected in these areas in 2009. It outlines the various regulatory changes that occurred in 2008, and how these changes impacted European exchanges, multilateral trading facilities and clearing houses.
In 2008, due in part to the effects of MiFID, Europe's long fractured and difficult-to-navigate trading and clearing landscape began to coalesce into what could become a true pan-European marketplace, with cross-border connectivity and transparency. Multilateral trading facilities (MTFs) and new clearing houses sprung up quickly, taking a formidable bite out of the trading volumes of the traditional exchanges. Today, clearing is moving center stage because of concerns over counterparty risk, and European central counterparties (CCPs) are fighting to be the dominant force not only in their own domestic markets, but in the burgeoning pan-European market as well. No longer are traders forced to play by the rules and high costs of the one and only exchange and clearing house in each country.
Established MTFs such as Chi-X and Turquoise - and newer ones, like BATS, Equiduct and Octopus - offer lower trading costs and faster executions than traditional exchanges, bringing the battle to large exchanges. A price war on the trading side of the market erupted in 2008, with venerable institutions (the largest targets, in the eyes of MTFs) such as the London Stock Exchange being forced to adjust their pricing in order to remain competitive.
"Aite Group expects to see increased competition in the future for the European market, both on the trading side, with MTFs gaining popularity, and the clearing side, with pan-European CCPs emerging and CCPs merging," says Phillip Silitschanu, senior analyst with Aite Group and author of this report. "During this transition, there is little doubt that European regulators will want to remain in control of the process - both the European Commission (EC) and the European Central Bank (ECB) will seek to maintain their influence and control over post-trade processing infrastructures."
This 33-page Impact Report contains six figures and five tables. Clients of Aite Group's Institutional Securities & Investments service can download the report.