Euronext takes first step to a European clearing house

Grounded Lithium

21/06/2022 16:45

By Huw Jones
    LONDON, June 21 (Reuters) - Euronext said on Tuesday it has
changed how it calculates risk in government bond trades in the
first step of what it hopes will transform the European exchange
into a regional clearing house on par with rivals like the
London Stock Exchange and Deutsche Boerse.
    Euronext bought the Milan exchange last year from the London
Stock Exchange and has begun using its clearing arm CC&G, now
rebranded Euronext Clearing, to build a pan-European clearing
house that can offer cross-border savings.
    It dovetails with European Union efforts to build a deeper,
more autonomous capital market.
    Clearing ensures a trade is completed even if one side of
the deal goes bust, critical for keeping markets stable and a
moneyspinner for exchanges.
    Euronext said that from Monday, Euronext Clearing started
applying a method known as VaR to determine how much margin
banks and brokers must post against their Italian, Portuguese,
Spanish and Irish government bond trades.
    VaR is increasingly used by the world's top clearing houses
for at least some of their products, replacing the MVP SPAN
methodology which the Italian clearer had been using for bonds.
    Savings for customers using this more precise margin
calculation will be "sizeable", said Anthony Attia, global head
of post trade and primary markets at Euronext.
    "Having VaR is more reliable for us in order to capture the
different risks and at the same time it should generate
efficiencies and more accurate level of margin," Attia said.
    VaR will be rolled out for stocks clearing next year, with
derivatives added in 2024, when all transactions on Euronext
markets will be covered and in the same default fund.
    "At that moment will probably be one of the first ones to
have 100% VaR," Attia said.
    Euronext has already said it would stop using LSEG's
Paris-based clearing house for derivatives trades by 2024, and
switch to Italy.  urn:newsml:reuters.com:*:nL1N2RZ1N2
    

 (Reporting by Huw Jones, editing by Ed Osmond)
 ((huw.jones@thomsonreuters.com; +44 207 542 3326; Reuters
Messaging: huw.jones.thomsonreuters.com@reuters.net))