EuroCCP introduces comparability of all-in trading costs

EuroCCP introduces comparability of all-in trading costs

23/03/10

EuroCCP announced today it has introduced an enhanced billing feature that provides a new level of cost transparency to its customers. The new feature enables customers to easily aggregate trading and clearing costs into a single unit to arrive at an all-inclusive cost of trading, clearing and settlement.

EuroCCP now provides a monthly billing supplement to customers that shows clearing costs on the value of trades cleared. Settlement costs are likewise shown on the value of trades cleared.

Clearing fees are typically based on a fixed fee per trade cleared, irrespective of value, while trading fees are based on the value of the trade. The difference in fee structure has made it difficult for firms to estimate and compare all-in costs on trading venues, particularly if they use different CCPs.

EuroCCP is the first equities central counterparty in Europe to present post-trade and trading costs in equivalent terms to enable an estimation and comparison of all-in costs. Clearing and settlement costs billed to customers are shown in basis points on the value cleared, consistent with fees charged by trading venues on the value of trade executions. A basis point is 100th of one percent.

EuroCCP’s presentation of clearing costs in basis-point terms also facilitates the inclusion of clearing and settlement costs in smart order routers, enhancing trading firms’ ability to manage clearing costs effectively. Cost predictability is essential for trading firms.

Robert Barnes, Managing Director, Equities, at UBS Investment Bank commented, “EuroCCP should be commended for enhancing tariff transparency. Cost-per-ticket trends are subject to bias, for example as electronic trade sizes shrink. By adding value processed on its invoices, EuroCCP enables basis-point comparability, a more meaningful metric for competitive landscape cost analysis.”

Diana Chan, CEO of EuroCCP, said: “Our basis-point initiative demonstrates that EuroCCP listens closely to our customers, and responds quickly with innovative service enhancements. With our basis-point data, we are providing our participants with a valuable tool for managing their costs. Our basis-point data delivers the fee transparency and predictability that are critical to promote further competition in Europe’s securities markets.”

EuroCCP launched the basis-point initiative after a month-long pilot phase, during which customers provided their input and recommendations.