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How will the buy side benefit from the emerging European post trade infrastructure? 

August 1, 2014
FTSE Global Markets

While US traders already have to centrally clear all their OTC and exchange-traded derivatives, soon it will be Europe’s turn. Following that, the IT project initiated by the European Central Bank that is Target2-Securities (T2S) will allow all trades to settle on one pan-European platform in central bank money, perceived as the least risky type of cash settlement. For now, the spotlight is on clearing and in March, NasdaqOMX became the first organisation to be granted official central counterparty status by European Securities Markets Association (ESMA). More authorisations will follow in the months ahead until the start date for the obligation to clear, now expected to be in 2015. Ruth Hughes Liley reports on the implications.

No sooner had NasdaqOMX been authorised by ESMA questions were being asked about whether trades would have to be ‘frontloaded’ into the system between now and the clearing obligation date. Richard Metcalfe, director of regulatory affairs, Investment Management Association (IMA) , believes the system is being implemented from the bottom up as the industry works out which products are possible to clear and then ESMA, will take the final decision. “It is going to take a little while. For example, if a clearing house is offering clearing in the same products that NasdaqOMX is clearing, will they be subject to the same obligation?”

Read more: FTSE Global Markets

 
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