What is EuroCCP?
European Central Counterparty N.V. (EuroCCP) is a central counterparty. Central counterparties (CCPs) give protection to both parties in a trade, providing assurance to each party that the trade will settle at the agreed price in the event one party defaults on its obligations. Headquartered in Amsterdam, EuroCCP was formed in 2013 to provide safe and efficient equities clearing and settlement services throughout Europe. EuroCCP is the result of combining EuroCCP Ltd. and EMCF N.V., both formed in 2007.
EuroCCP clears equities from 18 European markets and from the United States, Depositary Receipts as well as ETFs and Currency ETCs.
EuroCCP, having its registered office at Strawinskylaan 1163, 1077 XX Amsterdam, The Netherlands, is registered in the commercial register under number 34268194. EuroCCP has a branch office in London that is registered in the UK as a UK Establishment with Company No. FC031747 and UK Establishment No. BR016817.
A system of global Legal Entity Identifiers (LEI) is under introduction. EuroCCP’s LEI is 724500937F740MHCX307.
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 17 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.