Following our Newsflash dated 6 October 2016 regarding the go live of EuroCCP’s direct link with the Norwegian Central Securities Depository (VPS) and Central Bank (Norges Bank), we would like to remind Clearing Participants and their Settlement Agents of the forthcoming changes to EuroCCP’s settlement arrangements in Norway.
We are delighted to announce that EuroCCP won the “Clearing House of the Year” award at last night’s Financial News Awards for Excellence in Trading and Technology.
A panel of 150 industry leaders and experts were invited by Financial News to rate five CCPs nominated for the Clearing House of the Year award. EuroCCP received the highest score from the panel among the nominated CCPs.
Dear Clearing Participant,
We are pleased to announce EuroCCP’s new arrangements in the Norwegian market. From Trade Date Thursday 3 November 2016, EuroCCP will activate its direct link to the Norwegian Central Securities Depository (VPS) and the Norwegian Central Bank (Norges Bank).
EuroCCP is a central counterparty (“CCP”) that clears equities traded in Europe. Here are some examples of questions and answers you can find in the Perspectives section:
Background information is available on the HMRC website and Euroclear UK and Ireland’s website
Clearing has many different meanings within the financial markets. In its broadest definition, clearing is a post-trade activity and aims to reduce risk. This often means using a central counterparty (CCP) to eliminate risks associated with the default of a trading counterparty.
In the OTC derivatives markets, ‘bilateral clearing’ means two parties to a trade make their own arrangements to reduce their exposure to each other's default.
A CCP is a corporate entity that provides a guarantee to both parties in a trade that if one party defaulted before the discharge of its obligations, the CCP would fulfil the financial obligations to the remaining party as agreed at the time of the trade. A CCP mitigates replacement cost risk or market risk – that is, the risk that the remaining party has to replace the trade at an unfavorable price.
A CCP centralises counterparty risk management and ensures a safe and controlled post-trade process.
A CCP adds value when there is counterparty risk i.e. the possibility that a trading party could become unable to fulfill its obligations, and when there is market risk i.e. the possibility that the price may have moved unfavorably if a trade has to be replaced after a trading party's default.
A central counterparty relies mainly on having sufficient collateral from a clearing participant to cover any losses it might incur if that clearing participant defaulted under normal market conditions. The CCP needs to have access to additional resources if the collateral of the clearing participant is insufficient to cover losses under stress conditions.
"Making the difference in clearing."