Earlier in the week when reporting about ICAP’s Euclid Opportunities Fund increasing its equity investment in ENSO LP as part of their increased involvement with consulting and trading optimization products. Another area of expansion has been with the firm’s Traiana settlement business. Initially providing cross institution and venue settlement of FX trades via its Harmony network, Traiana has been expanding to other asset classes as well as counterparty clearing.
Following on the expansion, Traiana announced that their new Harmony Clearing network has cleared its first equity CFD trade. ICAP didn’t provide the participants of the initial trade, but launch members of the network include Credit Suisse, JP Morgan, the Instinet platform, and clearing firms LCH Clearnet and EuroCCP. Although post-trade reporting for clearing and settlement typically falls into the lesser known and often called ‘boring’ back office part of trading, it is the infrastructure for connecting different financial institutions trading among multiple platforms and exchanges. In regards to FX, the Harmony network provides aggregated settlement (referred to as trade compression by Traiana) of positions to reduce costs and allow for smaller transactions sizes to be quoted, and has been attributed to helping lead to declining spreads over the last three years.
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Similarly, in regards to Harmony’s equity central clearing network, the goal is to reduce counterparty risk, increase transparency and assist in achieving T+2 settlement through trade compression. The overall efficiency is also expected to reduce net costs of transactions conducted between parties.
Commenting in ICAP’s public statement, Adam Toms, CEO of Instinet, referred to the cost advantages of the new product as he said, “Equities settlement is still costly and can be inefficient. Increasing efficiency in this process and enabling clearing will reduce risk and costs in the market. Working with Traiana and the CCPs will help achieve this goal.”
Roy Saadon, Head of EMEA and co-Founder of Traiana, added, “Traiana is proud to be chosen as a partner to the equities community in bringing this solution to market. In a period of regulatory change and cost reduction, moving OTC equity trades to a centrally cleared model that also provides netting benefits, represents a fundamental improvement to the structure of equities markets.”