EuroCCP, the European unit of Depository Trust & Clearing Corp., and European Multilateral Clearing Facility NV agreed to merge, hoping to form the biggest pan-European clearinghouse for stocks by the end of the year.
The combined company, which will be called EuroCCP NV, will be based in Amsterdam, with offices in London and Stockholm, Diana Chan, chief executive officer of London-based EuroCCP, said in a phone interview. Chan will retain that role at the new firm, the companies said in March when they announced plans to combine. Financial terms of the transaction weren’t disclosed.
EuroCCP clears stocks across 19 markets, including Bats Chi-X Europe Ltd., Stockholm-based Burgundy and London Stock Exchange Group Plc’s Turquoise. Competition in equity clearing arrived in Europe with alternative trading systems in 2007, driving down costs of buying and selling securities and processing the transactions. Clearinghouses act as central counterparties for every buy and sell order executed by their members, protecting them if other traders default.
“Everyone is very concerned about keeping costs down,” Chan said. “The biggest advantage is that two central counterparties are combining to one so there are tremendous savings due to margin efficiencies and simplicity of operations.”
The new clearinghouse will be owned equally by four shareholders. Nasdaq OMX Group Inc. and ABN Amro Clearing Bank, both shareholders in EMCF, will own half and New York-based DTCC and Bats Chi-X Europe will hold the rest.
“Now we will move full speed ahead preparing for integration,” Chan said. “The deal has to pass through regulatory and competition approval but we have been advised that we can work on the transition aspect of the transaction. People do need to get ready. We hope to close within the year.”
As volumes have shrunk, alternative trading systems have combined or shut down. EuroCCP and EMCF previously held takeover talks in 2010, without reaching an agreement. EuroCCP and EMCF compete in Europe with London-based LCH.Clearnet Group Ltd., Europe’s largest securities clearinghouse, and SIX x-clear Ltd., the clearinghouse owned by Switzerland’s SIX Group.