ICE purchases majority stake in Holland Clearing House whilst Britain probes MTFs

Multinational network of exchanges and clearing houses Intercontinental Exchange (NYSE: ICE) has today announced the completion of its previously announced strategic investment in the Holland Clearing House, a continental European derivatives clearing house, to support its comprehensive clearing strategy. ABN Amro Clearing has retained a minority interest.

Holland Clearing House (HCH) is based in Amsterdam and is the primary clearing house for the TOM multi-lateral trading facility (MTF). HCH is regulated and supervised in the Netherlands by the Authority Financial Markets (AFM) and the Dutch Central Bank (DNB). Terms were not disclosed.

This is an interesting move for the European expansion of ICE, especially bearing in mind the recent consultation within the Financial Conduct Authority (FCA) in the UK this week, in which the British regulator is reiterating the responsibilities of MTFs via a thematic review of their rule books. Bearing this in mind, it is interesting that ICE chose to acquire a firm based in Holland for its European MTF operations rather than in the financial heartlands of London alongside its ICE Clear Europe operations.

Congruently, London’s authorities have conveyed a sentiment that banks engaged in what they consider an “unfair liquidity provision” by using last look order types aggressively to increase the profitability of their books, with some buy-side participants warning the practice deserves as much regulatory scrutiny as the allegations of benchmark manipulation, according to a report by FXWeek.

Last look market-making allows price providers to reject orders within a short period of time if the trade is deemed unfavourable, which gives dealers a significant information advantage. British exchanges such as LMAX offer a no last look MTF, which has been majoring on technology since its inception and is currently the only non-bank MTF in London’s FX liquidity provision sector.

With the addition of HCH, ICE operates six clearing houses, and intends to launch ICE Clear Singapore in March 2015, subject to receipt of regulatory approvals. ICE operates London-based ICE Clear Europe, and HCH represents ICE’s first continental European-based clearing house.

For the official announcement from ICE, click here.

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