The BATS Chi-X Europe stock exchange has partnered with interdealer broker ICAP to combine several services that will soon enable market participants to trade fully cleared equity index exchange for physical (EFP) transactions anonymously, officials say.
An EFP involves the simultaneous exchange between two parties of a futures position for a position in the underlying asset, and the instruments are “currently traded over-the-counter (OTC), with the futures leg of the transaction being exchange-traded and cleared and the cash/physical leg settled on an OTC, bilateral basis,” according to an ICAP statement.
To reduce counterparty risk, BATS and ICAP have developed services that, taken together, provide “the first fully cleared equities EFP trading solution,” according to an official statement.
In addition, BATS has enhanced its BXTR trade reporting facility by expanding its Exchange Trade Reporting (ETR) services to enable the cash basket of the EFP to be traded on-exchange, officials say.
ICAP will be the first broker to use the enhanced service, with transactions available to customers of the firm’s ICAP Fusion e-commerce trading portal, officials say.
ICAP will also make available fully cleared equity index EFPs on its ISL multilateral trading facility (MTF) and will “facilitate traditional voice broking in these products via its Global Broking division,” the statement says.
“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 standardized,” says Mark Hemsley, CEO of BATS Chi-X Europe, in a statement. “By settling more trades with CCPs and netting settlements, counterparty risk and costs across the European market will be reduced.”
Need a Reprint?
Leave a Reply