Traiana, the leading provider of post-trade and risk solutions, announces today the launch of Harmony CCP Connect for Equities and the successful completion of its first trade. Some of the largest equity broker dealers, including Credit Suisse, J.P. Morgan and Instinet, will automate the central clearing of their OTC equity trades via Harmony CCP Connect and will use the interoperable solution initially to match and clear equity contract for difference (CFD) related hedging trades at their preferred clearinghouse. CCP Connect for Equities will have additional banks joining the network over the coming months and is currently connected to three CCPs – LCH.Clearnet, EuroCCP and SIX x-clear. The first trade was completed yesterday between two banks.
The transfer of OTC equity trades from the existing bilateral settlement model to a central clearing (CCP) model, represents a proactive approach by the industry to reduce counterparty risk, increase transparency and assist in achieving T+2 settlement through trade compression.
In addition, participating broker dealers will gain efficiency and cost savings as CCPs net these transactions alongside existing on-exchange flow, reducing the cost of settlement. Traiana estimates that participants could reduce settlement costs for OTC equity trades in EMEA by up to $30 million on an annual basis.
Harmony CCP Connect provides a comprehensive cross-asset solution for OTC clearing via the Harmony Network, including connectivity into multiple CCPs across cash equities, interest rate derivatives, credit derivatives and foreign exchange derivatives. In addition to the efficiency and cost savings, participating brokers will benefit from the reduced counterparty risk and operational overhead resulting from using a CCP.
“We are very pleased to be a founding member of this initiative; it is an exciting development for the industry that enables electronic matching and CCP netting for bilateral executed transactions. With global markets targeting shorter settlement cycles, this initiative supports our Clearing strategy, increases STP on non-exchange flows and reduces settlement cost,” said Lee Ellmore, Global Head of Securities, FX & OTC Strategic Change, Credit Suisse.
“Equities settlement is still costly and can be inefficient. Increasing efficiency in this process and enabling clearing will reduce risk and costs in the market. Working with Traiana and the CCPs will help achieve this goal,” said Adam Toms, CEO, Instinet.
“The OTC equity market has consistently had high error rates and very bespoke processing. By working together with other equity brokers, the CCPs, and Traiana, we can resolve errors on T-0 and merge OTC and exchange flow into the same scalable process,” said Fabrice Carrier, Managing Director, J.P. Morgan.
“Traiana is proud to be chosen as a partner to the equities community in bringing this solution to market. In a period of regulatory change and cost reduction, moving OTC equity trades to a centrally cleared model that also provides netting benefits, represents a fundamental improvement to the structure of equities markets,” said Roy Saadon, Head of EMEA and co-founder of Traiana.