Euronext / EuroCCP – Question & Answers
1. Euronext – a shareholder of EuroCCP
How has Euronext benefitted from becoming a shareholder of EuroCCP?
EuroCCP is the leading equities CCP in Europe, providing safe and efficient clearing services for 16 trading platforms. Euronext was pleased to invest in shared post-trade infrastructure with other exchanges and has become an equal shareholder in EuroCCP. This will allow it to influence the provision of clearing services and EuroCCP’s strategic direction.
Do all shareholders have equal rights in EuroCCP?
Yes, all shareholders have equal rights in the company.
Is this Euronext’s first step in switching its clearing arrangements from LCH SA to EuroCCP?
LCH SA will continue to clear for Euronext, for those members that wish to do so.
Euronext envisages a continued extension of “user choice” which will provide access to multiple CCPs in the future.
Does Euronext’s potential acquisition of LCH SA change the view of either User Choice or Interoperability?
Euronext is fully supportive of competition in cash equities clearing and, as stated at the Investor Day in May 2016, intends to implement full interoperability when it is technically feasible, meeting all relevant regulatory approvals. In the meantime, Euronext will continue to implement the User Choice model, which is independent to any potential acquisition.
In what way is EuroCCP the “leading” pan-European CCP?
EuroCCP leads by volume of transactions cleared – it cleared 58% of trades on platforms where it competes with other interoperating CCPs and 42% of all CCP-cleared trades in Europe, as at Q1 2016. It has also a successful track record, being the first pan-European CCP and the first equities CCP to be authorised under EMIR. It is the only CCP to have been nominated in equities clearing for the Financial News’ “Clearing House of the Year” award over the last 3 years and won the “Clearing House of the year” award in 2016, for the fourth time.
Why is EuroCCP described as “the best post trade solution”?
EuroCCP is the clearer of choice for many firms. It is the market leader by volume of transactions cleared – 58% of trades on those platforms where it competes with other interoperating CCPs. It is at the forefront of advocating for greater competition in equities clearing through extended access and interoperability, for the benefit of all market participants.
In addition, EuroCCP is committed to providing its clients with the most efficient access to local markets, which improves settlement efficiency and reduces costs. EuroCCP settles directly in 15 of the 19 markets it services, including France, Holland, Belgium and Portugal. This unique operations model among equities CCPs, allows EuroCCP’s clients to benefit from the efficiency-enhancing functionalities offered to CCPs by T2S.
2. “User Choice” model & Interoperability
Can firms clear all their Euronext activity with EuroCCP?
In the absence of interoperability arrangements between LCH SA and EuroCCP, only those Euronext transactions where both sides of the transaction are undertaken by a member having selected EuroCCP as its “preferred CCP” will be cleared by EuroCCP. This model is called the “User Choice” model.
These Euronext trades can be netted against the activity executed on other platforms supported by EuroCCP for settlement purposes.
Non-guaranteed Euronext transactions will not be cleared nor processed by EuroCCP and these instructions will continue to be settled bilaterally.
Will the introduction of the “User Choice” model maximise operation and commercial efficiencies for Trading Members?
Trading Members and Clearing Participants will enhance their commercial efficiencies. The User Choice model is an initial means toward gaining substantial commercial benefits. Once there is full interoperability, EuroCCP will be able to maximise the operational and commercial benefits for Trading and Clearing participants, as all trades of firms that have selected EuroCCP as their CCP of choice will then be fully netted into only one net-settlement per ISIN per day.
What is the estimation of the commercial benefit for the community during the interim period of the “User Choice” model?
As the “User Choice” model is implemented, we anticipate ongoing phases of client participation. The cost reduction for the community has been estimated as a total saving of EUR 2.5 Mio for the early adopters, which will grow to circa EUR 6 Mio within a few months, as other members take advantage of this service. The estimated savings once full interoperability is in place is expected to be in excess of EUR 10 Mio for EuroCCP’s current Clearing Participants alone.
When will the service be fully interoperable?
The service will be fully interoperable once all CCPs to which Euronext has granted a trade feed interoperate with each other. The exact timing will depend on Euronext and each CCP‘s readiness to interoperate, subject to all relevant parties obtaining the required regulatory approvals.
 Based on EuroCCP’s estimates, using publically available data.
3. Markets & Launch dates
Which Euronext markets and instruments can be cleared by EuroCCP and when?
EuroCCP will be able to clear all cash equities activity, including Rights, ADRs, GDRs, ETFs and Trackers for the following Euronext markets and MTFs, in five waves starting on 20 March and ending on 18 April 2017:
Do the above waves also apply to the trades confirmed on the Euronext’s Trade Confirmation System (TCS)?
Yes, the same waves will apply to all TCS trades.
Are there any pre-requisites to the EuroCCP clearing of TCS Trades ?
TCS trades are considered by EuroCCP as “Off Order Book” trades.
As such, the clearing of TCS trades is subject to the conditions detailed in EuroCCP’s Regulation Trade Refusal.
4. Adoption of the “User Choice” Model.
What do I need to do If I wish to adopt the “User Choice” Model?
Firms wishing to adopt the “User Choice” Model should contact Euronext’s membership department; they will be invited to complete the appropriate forms. Further information can be found on the webpage https://www.euronext.com/membership
Trading firms wishing to use the “User Choice” Model should advise their Clearing firms, which should advise EuroCCP’s Relationship Management team. Existing EuroCCP Clearing Participants must complete a Statement of Authority, and confirm their netting and settlement preferences with the intended activation date, which should be forwarded to EuroCCP’s Client Services team.
On receipt of the forms and supporting information, EuroCCP will liaise with Euronext to ensure that Euronext and EuroCCP’s systems are configured accordingly. Clearing Participants will be required to undertake testing prior to going live.
Do firms wishing to adopt the “User Choice” Model need to become a EuroCCP Direct Clearing Member?
No, interested parties can use the services of a EuroCCP General Clearing Participant, a list of which can be found in the “about” section of the EuroCCP website.
How does one become a EuroCCP clearing member?
Firms wishing to become a direct member of EuroCCP must meet EuroCCP’s membership requirements as detailed in EuroCCP’s Rule Book and apply for membership. The process should take no more than four weeks once all relevant documentation and contracts are duly signed and returned to EuroCCP.
Any parties interested in applying for membership should contact EuroCCP Relationship Management at firstname.lastname@example.org for further information.
What are the testing arrangements?
Euronext’s testing environment is free of charge and with daily business support from 09.00 to 18:00 CET, with the exception of Wednesdays, where the testing environment is unavailable in the morning until 13.00 CET.
EuroCCP‘s testing environment is available on business days on a free of charge basis, between 09:00 and 17:00 CET, with the output distribution following thereafter. Specific ISINs will be made available for testing.
Clearing Participants wishing to test should contact the Euronext CTSG team and EuroCCP’s Client Services team to discuss their testing requirements and ensure that the test systems are configured accordingly. They should advise Euronext of the Trading Participant ID with which they wish to test and provide EuroCCP with a completed “EuroCCP testing form”.
6. EuroCCP Reporting
What will be the impact of adoption of the “User Choice” model on EuroCCP and Euronext reporting?
There will be no impact on Euronext’s existing reporting.
An additional “post-trade trade confirmation” message which includes a CCP identifier will be available. This will be issued almost immediately after the distribution of the trade order.
This new message will be delivered within the current legacy system and thereafter with Euronext’s new release.
Further information can be found at https://www.euronext.com/fr/it-documentation/order-entry
There will be no impact on EuroCCP’s reporting.
Euronext trades will be included in the existing EuroCCP reporting (real time trade feed, intra-day and end-of-day trade files).
Euronext trades will appear in EuroCCP’s reporting under the relevant Market Identifier Code (TAG 58 in the FIX messages and TAG 8 in the Client Information File (CIF).
TCS trades will be flagged in EuroCCP’s real-time FIX message in TAG 150 with a value of ’3’ instead of ‘2” and the “ETR” will be shown in field 150 “transaction type” of EuroCCP’s Client Information File (CIF).
EuroCCP’s reporting specifications are available at :
For further information on EuroCCP’s reporting, please contact EuroCCP’s Client Services team at email@example.com.
How will I know which transaction is cleared by which CCP?
After the provision of the initial execution confirmation, Euronext will provide a further copy of the trade confirmation message, including the CCP identifier, some moments thereafter.
7. EuroCCP Risk Management
What are the main characteristics of EuroCCP’s margin calculation methodology?
The main characteristics are as follows:-
- The location of execution has no bearing on the margin calculation
- The margin is calculated on the net positions
- The correlation between the different constituents of a portfolio provides margin offset
- Unsettled profit and loss of failed trades are deducted / added from EuroCCP margin requirements (Variation Margin component), and
- Risk exposure is assessed real time.
Will EuroCCP’s margin methodology differ depending on the Euronext markets?
No, the same methodology applies to all Euronext segments.
What will be the impact of the “User Choice” Model on margin requirements?
Firms adopting the User Choice model and selecting EuroCCP as their CCP of choice will face direct or indirect margin calls and clearing arrangements (including guarantee funds contributions) with both LCH SA and EuroCCP, as they will have cleared positions with both CCPs.
All the trades cleared by EuroCCP will be netted with the rest of a Clearing Participants’ activity that is cleared by EuroCCP for margining purposes.
It is not possible to predict the impact on margin levels as it will depend on the net positions which arise from the addition of the Euronext trades. Margin assessments can be undertaken by request, for a specific portfolio.
The trades cleared by LCH SA will continue to be margined by LCH SA.
What are the services available to EuroCCP participants to monitor risk?
Real time information on risk exposure is available to all EuroCCP’s Clearing Participants and to the underlying trading firms via TRACE, EuroCCP’s real time online risk management tool, which is free of charge.
Further information on the tool is available in the TRACE section of the “Participants‘ Centre” section of EuroCCP’s website.
Which settlement methodology will apply?
EuroCCP uses Trade Date Netting.
EuroCCP’s cleared trades are netted at ISIN and trade date level for settlement purposes. EuroCCP’s Clearing Participants will continue to enjoy EuroCCP’s current netting options which include cross-client and cross-platform netting.
EuroCCP instructs the relevant CSD of the settlement of its own obligations at the end of the day and Clearing Participants should likewise instruct the CSD themselves the settlement of their obligations. The instructions are matched and settled at the CSD.
To assist with the matching process, EuroCCP can instruct the settlement of its Clearing Participants’ obligations on their behalf to the CSD (“Already Matched facility”) or the Clearing Participants’ settlement agents (“Settlement Agent POA”). For further information on EuroCCP’s “Power of Attorney” services, please contact the Client Services team at firstname.lastname@example.org.
Given that EuroCCP is a direct member of T2S, EuroCCP’s participants can benefit from the complete suite of T2S CCP services that aims to increase settlement efficiency, which include auto-partialling and settlement prioritisation.
Where will the stock resulting from exercise and assignment be cleared and settled?
The delivery of equities resulting from exercises / assignments will be cleared and settled via instructions issued by LCH SA.
9. “User Choice” model – a compelling commercial proposition
Will firms wishing to adopt the “User Choice” model incur additional Euronext charges?
There will be no extra charges by Euronext for the use of the “User Choice” model. In addition, there will be no change to the current fee schedule and no extra reporting charges will apply.
Where can I find EuroCCP’s fee schedule?
EuroCCP’s current fee schedule is available on EuroCCP’s website in the section with regulations.
Clearing fees for the Euronext exchanges will be incorporated into the Fee schedule and published in due course.
Is it possible to have an assessment of the savings that can be expected from the adoption of the “User Choice” Model?
Yes. EuroCCP’s Relationship Management team can arrange a free assessment of the savings resulting from a client clearing Euronext’s activity with EuroCCP.
Will the adoption of the “User Choice” Model impact EuroCCP’s settlement cost levels?
Firms will be able to net their Euronext activity with their French, Dutch, Portuguese and Belgium activity executed on all other platforms cleared by EuroCCP and in doing so, mitigate additional settlement costs.
Will EuroCCP levy any “one-off” charges for the on-boarding of a new market, trading firm or clearing firm?
No – these costs do not apply at EuroCCP.
How much savings can I expect as a result of the adoption of the “User Choice” model?
The savings will be achieved as a result of EuroCCP’s highly competitive clearing fees, meaning that the higher the number of Euronext trades being undertaken at EuroCCP, the higher the savings.
In like manner, the higher number of firms adopting the “User Choice“ model, the bigger the proportion of the Euronext activity will be undertaken by EuroCCP, thus increasing the savings the firms can achieve.
How much more competitive is EuroCCP compared to LCH SA ?
EuroCCP has one of the lowest clearing fees among CCPs in Europe. The extent of the savings associated with using EuroCCP versus LCH SA would vary for each firm, because the savings would differ according to the firm’s business volume.
EuroCCP’s Relationship Management team would be pleased to undertake a free, no-obligation assessment of the savings resulting from the clearing of Euronext’s activity with EuroCCP.
10. EuroCCP and Euronext contacts
What are EuroCCP’s contacts?
Your main contacts for “Euronext on-boarding” are :
A detailed “EuroCCP contact list” is available in the contact us section of EuroCCP’s’ website.
What are Euronext’s contacts?