EU watchdog gives markets choice in share clearing

Investors could have more choice in where to clear share trades and pay less for them under new rules set out by European Union regulators on Thursday.

Market users would not have to use a clearer preferred or owned by an exchange and it would be harder for Deutsche Boerse's Eurex Clearing or the French Clearnet arm of LCH.Clearnet to stay out of a group of clearers which already work together.

The European Securities and Markets Authority (ESMA) published a draft framework under which clearers could only be allowed to restrict further cooperation on grounds of risk.

The rules would improve so-called "interoperability" in clearing shares underway in Europe via voluntary agreements between five national regulators.

Four clearers are currently linked together: EuroCCP, Swiss x-clear, EMCF, and the UK arm of LCH.Clearnet which together clear 60 percent of all share trades in Europe.

So far only the LSE's Turquoise platform and Chi-X allow clearing of their trades on any of the four.

If Eurex and Clearnet joined the cluster, some 80 percent of European share trades would be covered.

Clearing is a key moneyspinner for vertically integrated exchanges like Deutsche Boerse.

"The guidelines in principle are a step in the right direction and will help remove commercial barriers to market participants having a choice of where their trades are cleared," said Diana Chan, chief executive of EuroCCP.

The EU has proposed allow clearing houses to go a step further and request access to exchanges to clear their transactions but faces some national opposition.