BATS Chi-X Europe, a leading European stock exchange, has extended interoperable clearing to include exchange-traded funds (ETFs) and exchange-traded products (ETPs).

Guy Simpkin, Head of Business Development at BATS Chi-X Europe.

The move is part of the company’s campaign to address inefficiencies in the European ETF market so as to increase participation and liquidity for all investors and traders.

Starting next week, trading participants will be able to select one of three central counterparties (EuroCCP, LCH.Clearnet, or SIX X-Clear) to clear their trades executed on BATS’ order books.

The change, which brings the clearing and settlement treatment of ETFs and ETPs in line with other equity trading activity on BATS, will allow participants to net their ETF/ETP trades executed on BATS with their trades that are executed on other venues.

Given as much as 70% of all European ETF trading occurs over-the-counter, BATS has also made the interoperable model available to participants using the Exchange Trade Reporting capabilities within BATS’ market-leading BXTR suite of products. This will allow customers and their clients to realise significant collateral, risk and cost benefits.

Guy Simpkin, Head of Business Development at BATS, said: “As the original architects of the interoperable clearing model, we are encouraged that regulators have realised its huge potential in reducing cost and increasing market efficiency in the European ETF and ETP market, which equates to meaningful reform and is long overdue.”

He added: “The European ETF market is around a tenth of the size of its US equivalent, and changes to simplify market structure will enable it to grow in size and efficiency. We pursued our Registered Investment Exchange license, which is now a year old, with the explicit intention of improving the European ETF market and the momentum we’ve achieved so far reflects our commitment to reform this critical element of the market.”

In June, BATS in partnership with Euroclear Bank, announced the listing of an ETF on the exchange with an international securities structure. BATS is also the only exchange signatory on a recent industry letter sent to ESMA calling for greater transparency in the European ETF market.

As of July, five ETFs are listed on BATS, with a further 1,017 available to trade.