Regional approach

Thu, 03/12/2015

BSE-Sofia is analysing costs and benefits of Bulgaria participating in a potential CEE CCP. By Kristina Spasova, Relationship Manager, GSS Bulgaria.

In November, representatives of the Bulgarian Stock Exchange AD – Sofia (BSE-Sofia) and the Central Depository AD (CDAD) took part in a series of discussions with various stakeholders of the Bulgarian capital market on the possible participation in the establishment of a regional Central Counterparty (CCP) in CEE.

The initiative is led by the European Bank for Reconstruction and Development (EBRD), which has proposed the creation of a regional CCP that will cover a number of EU member countries in Central and Eastern Europe, with the potential to expand further over time to countries such as Serbia and Ukraine. According to EBRD, the regional CCP could be established through the expansion of the activities of an existing CCP in the region, such as CCP.A of Austria, AthexCLEAR of Greece, KELER CCP of Hungary or KDPW of Poland, to leverage on the existing infrastructure.

EBRD’s feasibility study shows that the creation of a regional CCP across the CEE countries will further drive the development of their capital markets and economic growth because:

  • central clearing provided by CCPs increases liquidity by reducing counterparty risk;
  • central clearing is a standard feature of developed capital markets;
  • introducing central clearing across CEE will improve market resilience and support their convergence process through alignment with EU standards;

EBRD sees several major benefits for Bulgaria to participate in the project:

  • investors will be able to avoid counterparty risk when trading, which will reduce the systematic risk for the domestic financial market;
  • the local market will potentially become more attractive to foreign investors, for whom reducing trading risks is a priority;
  • from a regulatory point of view, the availability of a CCP will be a necessary precondition for future trading in specific instruments.

Discussions are still at the preliminary stage of providing information on the possibilities, benefits and risks which EBRD sees in the establishment of a regional CCP.