Fresh plans for OTC equity trades to go through clearing

Michael Bow
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CLEARING houses are testing plans to allow more over-the-counter (OTC) equity trades to go through clearing, in a move that could cut settlement fees for banks and brokers.

Post-trade company Traiana, which is majority owned by interdealer broker Icap, is working with three of Europe’s biggest clearing houses to test the plan, which could save every bank $3m (£1.94m) a year in settlement fees.

The proposal would allow things like equity swaps and contracts for difference – common OTC equity trades – to be processed through clearing rather than settled between two parties.

The move could increase efficiency of post-trade settlements and cut the amount of money brokers have to put up in settlement fees.

LCH.Clearnet, SIX Group and the new entity made up of EuroCCP and European Multilateral Clearing Facility, when the two groups merge, are currently on board to test the service.

Icap sold a 12 per cent stake in Traiana in January to Bank of America Merrill Lynch, Barclays, Citi, Deutsche Bank, JP Morgan, Nomura, and the Royal Bank of Scotland, underscoring renewed bank interest in post-trades.

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