Why Did Turquoise Expand ETF Clearing House Options?

July 30, 2014

The aim of simplifying the issuance structure and post-trade environment in the European ETF market is to make it easier for liquidity providers to service clients and ultimately lower the cost of owning ETFs through reduced transaction costs.

 

ETF.com’s European editor, Rebecca Hampson, talks to Turquoise’s CEO, Robert Barnes, about why they have added this ETF function and what it means for them and the ETF market.

ETF.com: Why have you expanded your business to accommodate ETFs?

Robert Barnes: “Interoperable [bringing venues together] clearing is a catalyst for ETF growth in Europe.

Equity trading and clearing in the same place is a good thing because it is expensive to do this if fragmented cross-border. Turquoise has now added ETFs to trading of shares from 18 European countries with a CCP (central counterparty clearing house) choice that can consolidate clearing to net trades for single settlement into the respective domestic depository.

ETF.com: Why have you only done this now?

RB: July 21st was the first time that non-objection for clearing was granted.

On the back of this we enlarged our stock universe to more than 900 ETFs which are eligible for fully interoperable clearing.  This means that if you’re trading an ETF on Turquoise it can now be aggregated for post-trade economies of scale.

ETF.com: How is this going to help the ETF market?

RB: We are evolving the framework for efficient trading clearing and settlement. There is potential for a number of ETFs to grow on order book liquidity.

Our move into the ETF space facilitates MiFID II compliance by end of 2016 when ETFs become MiFID securities with Europe-wide transparency requirements.

ETF.com: Has it been easy to add this ETF function to your platform?

RB: It has been easy to add ETFs for trading because MiFID allows admission of an instrument with a working post-trade model, which Turquoise now can offer enhanced with clearing interoperability. 21st July was the first day we were able to do this following this non-objection for interoperable clearing of ETFs.

ETF.com: What sort of uptake have you seen in the nine days since launch?

RB: From day one of Turquoise offering ETFs to trade with interoperable clearing, members already exercised choice to clear ETFs in a CCP other than the incumbent CCP available pre-announcement of interoperability. Our expectation is that on order book liquidity may be low at the start, but likely will grow.”

 

 

 

 

 

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