How EuroCCP promotes safety and efficiency
EuroCCP’s business objective is to maximise netting opportunities for market participants through clearing for as many stock exchanges, multilateral trading facilities and trade sources as possible, thereby helping clients reduce risks and increase efficiency.
EuroCCP currently clears between 5 to 8 million trade sides each day from 30 stock exchanges, multilateral trading facilities and other trade sources in Europe, totalling €30 to €40 billion in value. At the end of each trading day, EuroCCP nets all trades executed by the same firm in the same security on any of the platforms cleared by EuroCCP into a single obligation for settlement with EuroCCP two days after trade date. Netting reduces operational risk because it reduces the number of trades that require settlement. EuroCCP’s netting ratio is over 99.5%: that is, only 0.5% of trades need to go to settlement after netting. Netting also reduces trading firms’ exposure to market risk and liquidity costs because it reduces the value of transactions that require settlement. EuroCCP nets away around 75% of the value traded, with an equivalent reduction in trading firms’ market exposure and liquidity costs.
When EuroCCP obtains access to additional trading platforms, clients’ trades from these platforms are netted with those in the same securities traded on platforms already cleared by EuroCCP. As a result, there are no additional settlement costs and no increase in operational risk.
EuroCCP has a continuous focus on increasing settlement efficiency. Trades that fail to settle on time require costly monitoring and can give rise to significant operational risks if there are associated corporate actions. Increasing settlement efficiency for clients is one of the primary drivers for EuroCCP becoming a direct member of as many central securities depositories (CSDs) as possible. Being a direct member, especially for CSDs joining Target2-Securities, enables EuroCCP to take advantage of settlement efficiency-enhancing features not otherwise available.
EuroCCP is an active contributor to industry and public sector initiatives and debates on how safety and efficiency in clearing can be enhanced.
Benefits of Using EuroCCP
- Robust risk management enables EuroCCP to calculate and collect the appropriate amount of collateral to protect a participant from another’s default.
- Low-cost clearing is provided by a tariff structure that is competitive and non-discriminatory.
- Pan-European capability enables Trading Participants to trade the same security on any of the platforms cleared by EuroCCP and have those positions – traded on the same day –netted into a single settlement and margin obligation.
- Reliable technology used by EuroCCP minimises delays and downtime. Processing capacity is capable of handling platforms’ anticipated peak volumes.
- Business continuity capabilities ensure that even during major disruptions, EuroCCP will remain operational.
How the Service Works
EuroCCP offers Clearing Participants a variety of reports with a choice of delivery via machine readable output, SWIFT or email. Delivery of the data is free but there are charges for the communication lines supplied by third-parties.
- Real-time reporting offer EuroCCP Clearing Participants reporting of executed trades as soon as the data has been received from the trading platform and validated in the system of EuroCCP. This service can be offered via a connection through BT Radianz or a VPN-line.
- Intra-day reporting provide EuroCCP data files via (S)FTP. The data is delivered in ASCII format. The intra-day files are sent three times per day: 11:00, 14:00 and 17:00 CET, but we can offer different timing and frequency as requested by clients.
- End-of-day reporting includes end-of-day margin reports, trade reports, settlement reports, netting reports and fees reports. The end-of-day reports are sent at around 19.00 CET.
Reports on trades are in the CIF file, whereas reports on risk management are in the CHC file. Both files contain data in an ASCII format and are sent via (S)FTP. EuroCCP can also send the end-of-day reports via secured email. When sent via email, data can be offered in either a .doc(x) or .pdf format.
An overview of the report contents, transmission types and distribution times can found in the Service Overview.
Details regarding format and content can be found in the CIF Specifications.