Alongside the other news that have been released today by ICAP, announcing of the additional hiring of former Hiscox’s veteran Mr. Stuart Bridges, more news have been released today by the multinational markets provider. Reportedly, ICAP and BATS Chi-X Europe are going to launch new services, enabling clients to trade EFP.
One of Europe’s greatest stock exchange BATS Chi-X Europe announced today that it will expands its BXTR services, making EFP trade reporting available. In conjunction with the British ICAP, BATS launch new services through ICAP Fusion. Clients will be able to access cash basket of the EFP and anonymously trade: “fully cleared equity index EFP (Exchange for Pysical) transactions”.
Explanatory, an Exchange for Pysical involves simultaneously the exchange between the following two parties: a futures position against a position for the underlying asset. At the moment EFPs are traded OTC, meaning over-the-counter, together with futures leg of a transaction that is being cleared and exchange traded. Along with the physical/cash leg being settled on OTC bilateral basis.
Responding to the evolving regulations, market participants from various asset classes are currently working on means to reduce the risk correspondent risk inherent to bilateral OTC trades. Resultantly, the initiations by ICAP and BATS have enabled the first trading solution with fully cleared equities Exchange for Physical. BATS improved its leading facility BXTR, used for trade reporting, through expanding its ETR services (Exchange Trade Reporting). Therefore, enabling all market participants to access EFP’s cash basket for trading on-exchange. However, as stated earlier, it will be primarily made available through ICAP at first, through the firm’s Fusion portal.
Due to ICAP’s unique and firm position within the market, it allows the operator to fully offer and facilitate cleared EFPs throughout the most common European Indices. In more detail, ICAP will execute it through the firm’s ISL MTF, while utilising traditional voice broking for these products through ICAP’s Global Broking Division.
Notwithstanding the CEO’s of both instances have commented on the new services through the press release on the website of ICAP. First off, BATS Chi-X Europe’s CEO, Mr. Mark Hemsley pointed out the benefits: “The versatility of BXTR has been further demonstrated with this new EFP service, which will allow for more effective balance sheet management, and for operational workflows to be standardised. By settling more trades with CCPs and netting settlements, counterparty risk and costs across the European market will be reduced.”
While, the Deputy CEO, Mr. Garry Stewart his satisfactory opinion upon the launch of new services: “As a leading player in execution services ICAP Global Broking is committed to developing innovative products for our customers particularly around hybrid and electronic trading offerings. ICAP Fusion provides a customisable, single point of access which will greatly enhance the operational efficiencies of clients. We are pleased to be working with BATS and our clients to refine and improve the trading of this market.”
Not so long ago a report came out, indicating the notional value that has been traded on the BATS’ BXTR at the total of €616.1billion. Marking the strength of Europe’s first exchange that set the standards, making BATS systems at current day mandatory for all equity trades that have the slightest involvement. Last but not least, as soon as BATS fully fully accept the trades, then they will be pushed real time similar to on-exchange and off-book trades. These trades are going to be coded through MMT, abbreviation for Market Model Typology.