Oslo Børs: Central Counterparty for equities launched

Oslo Børs: Central Counterparty for equities launched

07/06/10

Oslo Børs VPS / Oslo Clearing successfully launched a central counterparty (CCP) for clearing of trades in five selected shares listed on Oslo Børs on Friday. This represents a “soft launch” of a CCP for equities prior to the launch of CCP clearing for all equities, equity certificates and ETFs traded on Oslo Børs and Oslo Axess. This is planned to take place on 18 June.

The shares that were included in the central counterparty solution from 4 June are:

Sevan Marine (SEVAN), Norwegian Property (NPRO), Songa Offshore (SONG), Fred. Olsen Energy (FOE), and TGS-NOPEC Geophysical Company (TGS).

“Establishing a central counterparty represents an important development in offering a modern and unified infrastructure for securities trading in the Norwegian market. By providing an infrastructure service that gives market participants reduced risk and lower costs, we are improving our overall offer. Having a CCP structure in place also helps to strengthen our group's competitiveness. We have now established a CCP structure in Norway that it is fully competitive with similar marketplaces internationally”, explains Bente A. Landsnes, CEO of Oslo Børs VPS.

“Securities markets have experienced a torrent of technological development over recent years. CCP has become the industry standard, and our solution is now the newest and most modern in Europe. This will strengthen liquidity in the Norwegian market. The CCP structure will help to ensure that existing market participants continue to trade in the Norwegian market, as well as attracting new participants. As one example, the availability of CCP clearing is virtually essential for growth in algorithmic trading”, explains Christian Sjöberg, CEO of Oslo Clearing.

Background to the launch of central counterparty clearing
As a central counterparty in the equities market, Oslo Clearing will take on the role of legal counterparty for both the original purchaser and the original seller from such time as an order is matched on the exchange.

The introduction of a central counterparty reduces the risk exposure between participants (investment firms and banks) in the central securities settlement process, and increases confidence in the local market infrastructure. A central counterparty structure also causes a reduction in transaction costs for broking firms since the number of settlement transactions carried out is reduced by means of transaction netting, in other words only net positions are submitted for settlement.

By offering this service, Oslo Clearing will take over the counterparty risk and the liability that this involves. The company will cover this liability by collecting collateral from its members. This will provide cover for losses that might be caused by default. In addition, a defence mechanism will be established comprising a default fund that will operate as a supplement to Oslo Clearing’s equity. The default fund will be established by joint and several contributions from the members of the clearing house.