Nasdaq Launches CCP Clearing For SME Segments
Nasdaq announced the introduction of a central counterparty (CCP) participant for equity trading on Nasdaq First North in the Nordics, and Nasdaq Stockholm Small Cap*. This change will mitigate counterparty risk when trading in shares of small- and medium sized companies, while improving market efficiency and potentially increasing liquidity.
Starting today, trading on Nasdaq First North and Nasdaq Stockholm Small Cap will now have the same post-trade process as the Mid and Large Cap segments. The introduction of CCP Clearing will also increase access to Nasdaq First North and Nasdaq Stockholm Small Cap to institutional investors requiring central counterparties in order to make investments.
“With Nasdaq First North, one of Europe’s leading capital raising markets for growth companies, and also our Main Market Small Cap segments in Stockholm, Copenhagen and Helsinki, Nasdaq provides some of Europe’s most attractive markets for small and medium sized enterprises,” says Lauri Rosendahl, President, Nasdaq Stockholm. “We have been working together with market members, security dealer associations and investors across the region as well as our interoperable CCPs in order to ensure a smooth and market friendly transition.”
By introducing a central counterparty, counterparty risk is redistributed from the two parties involved in the trade, to a central counterparty participant – a third party firm specialized in managing risk. By removing bilateral risk, Nasdaq aims to attract more liquidity and thereby improve price formation.
“We fully support Nasdaq’s efforts to reduce the risk and potentially increase the liquidity pool in small- and medium sized companies,” says Patrik Tigerschiöld, Chairman of Bure Equity AB. “We are also happy to see that trading conditions between Nasdaq’s European markets have been further aligned, increasing overall market efficiency.”
The introduction of counterparty clearing on Nasdaq First North and Stockholm Small Cap is the final step of a transformation to central counterparty clearing for all shares listed on Nasdaq’s equity markets in Sweden, Denmark and Finland.
* Companies listed on Nasdaq European Markets belong to a market cap segment (Small-, Mid- and Large Cap) based on their average market value during the given review month. The market cap calculations are based on the total number of shares, i.e. both listed and non-listed shares, of a company. Companies with a market value exceeding EUR 1 billion are in the group of “Large Cap”. Companies with a market value between EUR 150 million and EUR 1 billion belong to the “Mid Cap” segment, while companies with a market value smaller than EUR 150 million belong to “Small Cap”.
Giancarlo said he intends to call three rulemakings for a vote before he leaves the CFTC.
In the last few years the upward trend in clearing has leveled off.
The US regulator will propose a rule next month on overseeing third-country CCPs.
Securities Financing Transaction Regulation is due to go live next April.
Customers in OTC interest rate derivatives clearing increased by 50% in the last six months.