Cécile Nagel, CEO of EuroCCP, sums up the events of a rollercoaster 2020 – including the acquisition of the clearing house by Cboe Global Markets in July – and discusses what trends are likely to shape our near future.
What was the focus of EuroCCP over the past year?
2020 has been a pivotal year for EuroCCP for numerous reasons. Despite the coronavirus pandemic wreaking havoc in financial markets with record volatility, threatening economic disruption not seen since the 1930s Great Depression, EuroCCP was not only able to consolidate its position as the leading pan-European equities clearing house, but also reinforce its operational resilience and achieve several business milestones, including the acquisition by Cboe Global Markets. Successfully completed in July 2020, the acquisition brought together two companies that have long championed competition, open access and clearing interoperability in Europe.
Of course there was also Brexit to prepare for. As part of this preparation, we onboarded four EU venues and six EU clearing members and achieved
a smooth transition of trading activity on 4th January. As an EU-based clearing house, EuroCCP is able to provide continuity of service for all
its clients for the next three years, and will continue to help them address the challenges of Brexit.
EuroCCP strengthened its position as Europe’s most-connected equities clearing house in 2020. Over the course of the year, we established additional single, interoperable and preferred clearing connections, increasing our coverage to approximately 95 percent of European equity trading flow for our clients. EuroCCP also maintained its position as the Nordic CCP champion, with continued high market share in the Nasdaq Nordic markets and growth in Oslo Børs clearing.
Partly driven by the volatility of last March, EuroCCP saw significant growth in cleared volumes, with €10 trillion cleared in 2020, averaging €41 billion a day. This amounted to 1.7 billion trades, a significant increase from 1.3 billion in 2019. The number of trades cleared through the preferred clearing model rose by more than 10,000 percent as competition was introduced to the Euronext markets for the first time. In 2020, EuroCCP cleared 3.5 million equity and ETF trades on Euronext Paris, Brussels, Lisbon and Amsterdam through preferred clearing, up from 33,000 the previous year.
What market drivers do you expect to see this year?
2021 is likely to be focused on dealing with the aftermath of Brexit and the consequences of the ongoing coronavirus pandemic. While there is still significant uncertainty around the medium to longer term relationship between the EU and the UK as well as the economic impact of Covid-19, there is some light at the end of the tunnel. I expect markets to be able to adapt to the new and changing environment. The Covid vaccine rollout has certainly raised expectations of a return to more normal conditions later in the year. Furthermore, while the immediate economic outlook may look bleak, there is also talk about a ‘bounce back’.
Policymakers and regulatory authorities all around the world are looking to create the right environment to foster growth and development with investment in new technology including artificial intelligence, as well as green energy. Governments need to encourage homegrown start-ups and a general climate where high-tech businesses can thrive. Venture capital seed funding, and the regulatory freedom for big investors to back it, has an important role to play.
The growing interest of retail investors and participation in financial markets that we are experiencing, including in Europe, are also likely
to create change. As we saw with the recent GameStop share price surge, retail investors have increasing influence thanks to the availability of free trading platforms such as Robinhood, social media forums such as Reddit, access to information and advances in technology.
What will EuroCCP be focusing on in 2021?
We’re really excited about our plans for this year. Cboe’s ownership of EuroCCP has provided the opportunity for us to focus on the development of equity derivatives clearing capabilities in support of its new Amsterdam-based exchange, Cboe Europe Derivatives, which is on track to launch in the first half of this year (subject to regulatory approval).
This exchange will initially offer futures and options based on six European equity indices as a first step and will be looking at further product opportunities at a later date, dependent on customer demand. Equity derivatives is a natural extension of our cash equities and ETFs businesses and a perfect diversification opportunity for EuroCCP.
The objective of this exchange is to bring a modern, transparent and vibrant pan-European model to the region’s derivatives markets by leveraging Cboe’s global derivatives expertise, our European cash equities footprint and world-class technology, along with both companies’ European cash equities footprints. On the clearing side, we will be able to bring efficiencies and cost savings to market participants and end investors, including by allowing a broad range of pan-European index futures and options to be cleared at a single CCP.
Of course, we will also continue to expand our offering for the ETF industry through primary and secondary market clearing in partnership with ETF issuers, ETF RfQ venues like Bloomberg and Tradeweb and other participants in the ecosystem. Our main focus remains to address fragmentation and inefficiencies in the European market.