The Wholesale Markets Brokers’ Association and the London Energy Brokers’ Association have replied to the European Commission’s Public Consultation on Derivatives and Markets Infrastructures. They said rules governing the structure and function of central counterparties (CCPs) must acknowledge that there is likely to be a conflict between them operating as utilities or as private enterprises.
They also stressed that all approved trading venues must have open and fair access to all CCPs and that access should be open to multiple trading formats including bilateral trades, voice-brokered trades, fully electronic over-the-counter trades and exchange-traded derivatives.
The associations argued that because price discovery was sometimes more efficient in voice-brokered trades, no CCP should be able to refuse such trades, if they are submitted for electronic straight-through processing in the same way that fully electronic trades are.
The WMBA and LEBA believe that prudential authorities, not CCPs, should be in charge of authorising contracts as eligible for clearing. These decisions, they said, should be public and transparent.
Alex McDonald, chief executive of the WMBA, said: “The vertically integrated trading and clearing models which are commonplace amongst exchanges can present biased and dangerous incentives and encourage such organisations to restrict access to other trading market infrastructures such as interdealer brokers and MTFs.
“This potential loophole in European regulation enables a single market sector or provider to develop an anti-competitive stronghold on OTC products newly mandated for clearing.”
Sian Williams +44 207 779 8370 firstname.lastname@example.org