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The Big Interview : Diana Chan
As the long-standing chief executive of EuroCCP , Diana Chan , steps down from her role , Hayley McDowell asks about with the company and what she believes the next decade holds for clearing .
Hayley McDowell : Having announced your plans to step down as CEO at EuroCCP , describe your journey with the company over the past 10 years . Diana Chan : I became chief executive at Euro- CCP when the multilateral facilities ( MTFs ), which were enabled under the first MiFID , started setting up in 2007 . I had already been working on pan-European post-trade issues for a few years , and felt that leading EuroCCP , a new financial infrastructure , to bring about competition and change in equities trading was what I wanted to do next . I am very happy to have achieved that objective , in spite of many challenges along the way .
MiFID introduced competition to stock
“ In the 10 years I ’ ve been running EuroCCP , the market has transformed considerably for the better . Competitive clearing has brought clearing costs down by more than 90 %.”
trading , so that the same stock could be traded on multiple trading platforms across Europe . The first MTF , Chi-X , eventually became a runaway success . EuroCCP was set up to provide clearing for the second MTF , Turquoise , which was started by a consortium of nine investment banks . Fast forward a few years – the firms that traded on the MTFs realised that when they trade the same stock on multiple platforms each using different central counterparties ( CCPs ), they needed to settle the same stock and provide collateral to each of those CCPs . It was not efficient and expensive .
The solution was for each trading platform to appoint more than one CCP , so that trading firms could direct their trades in the same stock on multiple trading platforms to the same CCP . The CCP would then net the firm ’ s trading positions across all platforms it clears for , resulting in a single settlement per stock and a single margin requirement on the net position . This would require all the CCPs clearing for the same platform to interoperate – that is , have arrangements in place to manage their exposure to each other . But it was not easy for the incumbent CCP on a platform to agree to let in a competing CCP to share its business .
The problem was solved when Bats Exchange introduced an arrangement called “ preferred CCP ” in 2011 . Bats added three CCPs that interoperated with each other , without requiring the incumbent CCP to interoperate . The six firms that made the switch on Bats all preferred EuroCCP . It meant that if a trade was executed between any of those six firms it would be cleared by EuroCCP , and if not , it would default to the incumbent CCP . The trial proved that when firms were given a choice of CCP , they would indeed move their business . Then Chi-X , the largest MTF at the time , became four-way and fully interoperable in 2012 . Within 30 days ,
62 // TheTrade // Autumn 2018