Markets have calmed but the economic outlook still looks bleak. EuroCCP lines out the advantages it sees in becoming part of the Cboe group – against a turbulent backdrop.
Contributed by EuroCCP. The article has previously been published in the PostTrade 360° event magazine.
2020 has been a hugely challenging year for European financial markets. At the beginning of the year few could have foreseen, let alone adequately prepare for, the onset and impact of a global pandemic. While markets have calmed following the wild volatility and market gyrations seen in March, largely due to the unprecedented actions of central banks designed to soften the worst impacts of the coronavirus, the economic outlook still looks bleak. And while we now know that the UK has left the EU, the terms of its future relationship with its biggest market is unclear. Financial services firms will only be able to continue to access EU markets if the UK is given regulatory equivalence, an outcome which is looking increasingly unlikely. Until this issue is resolved – a final decision on equivalence might not be made until next year – firms will need to navigate their way around a complex mishmash of national regulations, causing even more uncertainty and hindering the growth prospects for the sector as a whole.
Despite this difficult operating environment, in July we announced the completion of the acquisition of EuroCCP by Cboe Global Markets, one of the world’s largest exchange holding companies. This followed a strategic review initiated by EuroCCP in 2019 which focused on seeking new opportunities to diversify and grow our business. In December 2019 Cboe made an offer to buy 100% of EuroCCP’s stock.
Worked long for open access
There are numerous natural synergies between both companies as they have long championed competition, open access and clearing interoperability in Europe. EuroCCP currently clears trades for 37 trading venues, which represent close to 95 percent of all equity trades executed on organised markets in Europe.
Looking ahead, an important area of collaboration for the firms will be the development of derivatives trading and clearing capabilities in the region. It was recently announced that Cboe plans to launch Cboe Europe Derivatives in the first half of 2021, subject to regulatory approvals. This Amsterdam-based market is expected to initially offer trading in equity futures and options based on six Cboe Europe Indices: the Cboe Eurozone 50, Cboe UK 100, Cboe Netherlands 25, Cboe Switzerland 20, Cboe Germany 30, and Cboe France 40. In addition, Cboe plans to add futures and options on additional European benchmarks at a later date, based on customer demand. EuroCCP will provide clearing services for the platform, subject to regulatory approval.
ETFs gaining speed
Furthermore, the various ETF initiatives that we have undertaken in the last 18 months are expected to gain significant momentum in 2021. We continue to discuss with market participants opportunities to expand our ETF clearing capabilities, including further OTC RFQ connectivity. We also have plans for a new service for primary market clearing of ETFs – which will be the first of its kind in Europe – to go live later this year. Our aim is to help create efficiencies and support the growth of the European ETF market – in line with what is already happening in the US.
A new chapter
We firmly believe that the completion of the transaction with Cboe has positioned EuroCCP to continue our long-term success and marked the beginning of the next chapter for our business in Europe. In addition to building out our derivatives clearing services, we see many opportunities to collaborate with Cboe to expand our product offering, not just in ETFs but in other asset classes too, as well as to become the region’s leading advocate of open access and competitive clearing. With our shared values and focus on innovation and client service, we will do even more to develop capital markets in Europe.