BATS Chi-X Europe, the European stock exchange, has extended interoperable clearing to include exchange-traded funds (ETFs) and exchange-traded products (ETPs).
Effective 21 July 2014, trading participants will be able to select one of three central counterparties (EuroCCP NV, LCH.Clearnet Ltd, or SIX X-Clear) to clear their trades executed on BATS’ order books.
The change, which brings the clearing and settlement treatment of ETFs and ETPs in line with other equity trading activity on BATS, will allow participants to net their ETF/ETP trades executed on BATS with their trades that are executed on other venues.
Given as much as 70 per cent of all European ETF trading occurs over-the-counter, BATS has also made the interoperable model available to participants using the Exchange Trade Reporting capabilities within BATS’ BXTR suite of products. This will allow customers and their clients to realise significant collateral, risk and cost benefits.
Guy Simpkin, head of business development at BATS, says: “As the original architects of the interoperable clearing model, we are encouraged that regulators have realised its huge potential in reducing cost and increasing market efficiency in the European ETF and ETP market, which equates to meaningful reform and is long overdue.
“The European ETF market is around a tenth of the size of its US equivalent, and changes to simplify market structure will enable it to grow in size and efficiency. We pursued our Registered Investment Exchange license, which is now a year old, with the explicit intention of improving the European ETF market and the momentum we’ve achieved so far reflects our commitment to reform this critical element of the market.”