The Risk Controllers: Central Counterparty Clearing in Globalised Financial Markets

15

Cross-border Clearing in Europe

15.1 CCPs FOR EQUITIES

Just as America's futures markets and CCPs were ripe for reshaping at the turn of the century, so the spread of central counterparty clearing to Europe's equity markets was overdue.

There was nothing to match NSCC in the US which cleared virtually all equity and bond trades on a continental scale. The realignment of clearing and settlement infrastructures at a national level in Europe in the 1990s hardly advanced the spread of equities clearing and left untouched the problems of high cost and complexity for clearing cross-border trades. Central counterparty clearing of equities in Europe remained a minority sport.

As a result of Jean-François Théodore's reshaping of French financial markets in the 1990s, the Paris stock exchange was home to the continent's leading CCP for equities. Two smaller stock exchanges – Amsterdam and Brussels – also provided central counterparty clearing for equities by the end of the 1990s whereas LCH began clearing for Tradepoint, a small London-based electronic stock market, in September 1995.

Belgium put a CCP between its trading and settlement infrastructures when it adopted the vertical silo model late in the 1990s. Some years earlier, the Amsterdam Stock Exchange set up a wholly-owned subsidiary – Effectenclearing BV – that became the counterparty for buyers and sellers trading government securities, corporate bonds and shares on the exchange. Effectenclearing netted the positions on a daily ...