Monday 27 November saw the Euronext cash markets in Amsterdam, Dublin, Lisbon and Paris start sending their clearing activity to Euronext Clearing, the new pan-European clearing house managed by Euronext. This significant milestone establishes Euronext Clearing as the default clearing house for its European cash markets. It contributes to the vision of a seamlessly connected European financial ecosystem.
A harmonised clearing framework across Euronext
Euronext Clearing services now cover a wide range of financial instruments, including equities, ETFs, structured products, warrants, and bonds, across six Euronext markets. While Euronext Clearing is not the default CCP for Euronext’s seventh market, Oslo, clients in Oslo can still decide to use Euronext Clearing. Euronext Clearing now processes over million transactions daily for European and local clearing members. It is positioned as the Central Counterparty (CCP) of choice for approximately 25% of European cash trading.
The road to Euronext Clearing
The roll-out began with Euronext Brussels cash markets switching to Euronext Clearing on 6 November. This was followed three weeks later by the successful extension to cash markets in France, Ireland, the Netherlands, and Portugal. The Italian markets were already using the clearing house, which became part of Euronext with the acquisition of Borsa Italiana in 2021.
Euronext's expansion of clearing operations represents a major stride towards creating a more integrated and efficient financial market on the continent. It is an integral part of Euronext’s strategic plan. It also aligns with the broader goal of nurturing the Capital Markets Union in Europe, aiming to minimise fragmentation within European capital markets.
A streamlined trade life-cycle
The harmonised clearing framework enables market participants to streamline their entire trade life-cycle within Euronext. As well as using Euronext Clearing, they can leverage the Euronext Securities CSD network to access Target2-Securities (T2S) for settlement. Clients can benefit from increased efficiency, reliability, and a structure that is adapted to the dynamic landscape of modern financial markets.
An advanced Value-at-Risk model
Euronext Clearing now offers a new Value at Risk (VaR)-based margin methodology. This best-in-class model aligns with evolving market standards. It offers increasingly efficient and resilient solutions for risk capture and allocation. The VaR framework was introduced for the Italian equity, ETF and financial derivatives markets in October this year.
Supporting clients in the switch to a new clearing system
The migration saw readiness teams in Italy, France, the UK and Ireland work closely together to support clients in the process of moving to a new default clearing house for the cash markets. Clearing Members not already connected to Euronext Clearing needed to extend their membership, set up connectivity and carry out testing. And although there were no functional or technical changes for Trading Members, they needed to perform ‘front-to-back’ testing to ensure that their cleared activity was being correctly processed by the new system.
Further expansion in 2024
Looking ahead, Euronext is set to further expand its clearing activities to include Euronext’s financial and commodity derivatives in Q3 2024. This will also allow the introduction of a unified equity and derivatives default fund, which is expected to facilitate cross-margining. Clients will be able to optimise their trading activities across the seven Euronext markets and across asset classes.
Built on decades of experience
The clearing expansion builds on Euronext’s many years of experience running successful technological projects, including the integration of both Euronext Dublin and Oslo Børs onto the Euronext proprietary trading technology, Optiq®. Since the acquisition of Borsa Italiana in April 2021, Euronext has moved its Core Data Centre from the UK back into an EU country, Italy, and migrated Italian cash markets to the Optiq trading platform.
Next year will see the completion of the integration of the Italian markets. Italian derivatives trading will migrate to Optiq® in Q1 2024, paving the way for the pivotal clearing migration to be completed with the expansion of Euronext Clearing to Euronext listed derivatives. This will strategically position Euronext across the entire trading value chain. Clients will have access to a centralised platform for managing collateral and accessing crucial information on risk and clearing processes.
Creating a unified and resilient marketplace
As Euronext continues to evolve and expand, it underscores its dedication to creating a unified and resilient European financial market. The strategic clearing initiative not only benefits market participants, but also sets the stage for a robust and interconnected financial future across the continent, helping to shape capital markets for future generations.
Find out more about Euronext Clearing