ICAP routes €212 billion notional equity baskets into Bats Europe’s ETR service since the launch of their cleared basket solution
19 July 2016
London, New York, 19 July 2016 – ICAP plc (IAP.L), a leading markets operator and provider of post trade risk mitigation and information services, and Bats Europe (Bats), Europe’s largest stock exchange, announce today that following a successful launch of ICAP’s cleared equity basket solution in April 2015, over €212 billion of notional trades have been routed through the Bats Exchange Trade Reporting (ETR) service for clearing during the financial year ended 30 June 2016.
ICAP and Bats developed the innovative solution to solve over-the-counter (OTC) market issues surrounding the trading of European index Exchange for Physical (EFP). Prior to the solution being launched the cash/physical leg of the transaction was settled on an OTC bilateral basis, while the futures leg was exchange-traded and cleared. The service enables cash equity baskets to be traded anonymously on-exchange and cleared, deepening liquidity and broadening ICAP’s customer base.
The solution sees customers submit their equity trades through the ICAP Securities Limited (ISL) multilateral trading facility (MTF) accessed on ICAP Fusion, the company’s e-commerce portal for trading venues. ICAP then routes these matched third party trades to Bats’ ETR service to enable the cash basket to be reported on exchange and cleared through the CCP, mitigating bilateral counterparty risk.
The Bats ETR service provides reduction in counterparty risk by providing centralised clearing, a comfort during recent market uncertainty and volatility. On Friday 24 June, following the UK EU referendum results, ICAP routed more than 80% of its EFP business to Bats cleared ETR services, up from the typical 60%, emphasising the importance of centralised clearing during times of market uncertainty to reduce counterparty risk. This trend is likely to continue as the balance sheet of banks, and the reduction of OTC counterparty risk continues to be a priority in financial services.
Coupled with significant settlement cost savings, this innovative solution has future-proofed this type of trading activity by ensuring it adheres to new regulations such as MiFID II and Basel III which seek to make markets more transparent and reduce counterparty risk.
In the fifteen months since launch of the EFP solution, 21 trading firms have gone live with the service, with a further 10 scheduled to go live in 2016. Over the past year, the total volume routed through the Bats third-party broker ETR service was €221 billion, with ICAP representing the majority of the volume for this type of activity.
Garry Stewart, Deputy CEO of EMEA Global Broking at ICAP, said: “Collaborating with Bats Europe, ICAP has developed a unique solution, for a market which has seen limited innovation since it was founded. The combination of our ICAP Fusion portal and strong voice broking relationships, have allowed us to provide wholesale clients with a flexible, fully cleared trading solution for cash baskets across the major European Indices. The take-up of our combined solution demonstrates the market interest for fully cleared, on exchange trading in traditional OTC brokered markets.”
Mark Hemsley, CEO of Bats Europe said: “We are delighted that our collaboration with ICAP to provide a service that helps improve market safety by reducing counterparty risk, has had such an immediate and significant impact. The solution proves that our ETR services are well positioned to help traditional OTC markets trade on-exchange and achieve regulatory compliance in the evolving trading landscape. We look forward to our continued partnership with ICAP and will continue to focus our efforts in making markets better for all of our customers and partners.”
The Bats ETR service is one component of the BXTR suite of on- and off-exchange trade reporting services Bats launched in November 2013. Additional information about the Bats third-party broker ETR service is available here: http://www.batstrading.co.uk/bxtr/on_exchange/
ICAP is a leading markets operator and provider of post trade risk mitigation and information services. The Group matches buyers and sellers in the wholesale markets in interest rates, credit, commodities, FX, emerging markets and equity derivatives through voice and electronic networks. Through its post trade risk mitigation and information services ICAP helps customers manage and mitigate risks in their portfolios. For more information, go to www.icap.com.
About Bats Europe
Bats Europe is Europe’s largest equities exchange and offers trading in more than 4,000 securities across 15 major European markets, over one platform and under one rule book. In addition, Bats’ leading trade reporting service, BXTR, reports the majority of OTC equity market trading executed in Europe. Based in London, Bats Europe is regulated by the UK Financial Conduct Authority.
Bats Europe is the brand name of Bats Trading Limited, a subsidiary of Bats Global Markets, Inc., a leading global securities market operator in the US and Europe. Further information is available at www.batstrading.co.uk or for regular updates, on Twitter at @BatsGlobal.