309 Checking theory against reality – case studies of network strategies system) that CCorp held on behalf of its clearing members. Eurex’s window of opportunity thus resulted from the open question of who actually ‘owned’ the open interest and from the possibility that the ‘old’ open interest in CBOT’s treasury products would remain at CCorp until the expiration of the contracts in March 2004. With the launch of Eurex US in February 2004, the holding of open interest in US treasury contracts from the CBOT and Eurex US at a single clearing house was envisaged to create attractive opportunities for traders and unique dynamics for Eurex US. It was unclear whether CBOT would succeed in claiming the legal ownership of the open interest and thus in transferring the open interest in treasury products from CCorp to the CME prior to the launch of Eurex US; particularly as such a move required the cooperation and execution on the part of a number of parties, including the CFTC to author ise the transfer of the open interest from CCorp to the CME. 75 CCorp was thus the ideal partner for Eurex. Although counting on the success of Eurex’s new US exchange was risky, CCorp’s strategic options at that time were either to accept the CBOT’s pur- chase offer (and thereby be put out of business) 76 or to try to expand its business by pursuing independent growth opportunities. 77 Once CCorp had made the choice to expand its business – independent of any exclusive arrange- ments and without the almighty CBOT – the cooperation agreement with Eurex represented a tempting opportunity. Eurex, at that time twice the size of CCorp in terms of cleared volume, the world’s largest derivatives exchange and raring to grow its business, was an attractive partner for CCorp. The partnership deal signed between Eurex and CCorp consequently gen- erated a number of compelling benefits: 78 r all market participants in US t reasury futures were already connected to the a/c/e trading platform and CCorp’s clearing infrastructure; r market participants could thus benefit from continuity through the use of existing trading and clearing infrastructure; r enhanced value for market participants could potentially be created through additional trading and clearing opportunities in US and European products; 75 Cf. Falvey/Kleit (2006), p. 18. The CBOT ultimately succeeded, with the approval of the CFTC, in transferring the open interest from the CCorp to the CME prior to the launch of Eurex US. Whilst in this case the CBOT effectively claimed the legal ownership of the open interest that CCorp held on behalf of its clearing members, the general question of who legally owns the open interest still sparks debate. For an example of a more recent debate, refer to de T ´ eran (2007), p. 33. 76 It was agreed that the CME would perform all of the CBOT’s clearing operations, regardless of whether or not CCorp accepted the CBOT’s offer. From the CBOT’s perspective, the benefits from the acquisition lay in the assumption of CCorp’s registration as a DCO and the subsequent ease of transitioning the open interest from CCorp to the CME. 77 Cf. Kentouris (2003b), p. 16. 78 Cf. Eurex/The Clearing Corporation (eds.) (04.09.2003a), pp. 9–10. 310 Clearing Services for Global Markets r of the top twenty Eurex exchange cust omers, eighteen were shareholders as well as clearing members of CCorp; and r additional synergy potential was offered in that ECAG provided 98 per cent of the risk transfer in euro-denominated fixed income futures and CCorp cleared over 98 per cent of all USD-denominated treasury futures. 8.1.2.3 Concept and structure of the initiative In September 2003, when the two companies signed their non-exclusive long- term partnership deal, 79 they agreed that CCorp would clear for Eurex’s new US exchange and that their link would give members of both clear- ing houses direct access to US and European products. Additionally, it was agreed that subject to shareholder approval, CCorp would change its corpo- rate and capital structure, allowing Eurex to take a 15 per cent equity stake in CCorp 80 through its 100 per cent subsidiar y US Exchange Holdings, Inc. Nonetheless, CCorp would remain independent and continue to provide ser- vices to multiple marketplaces. Eurex and CCorp further agreed to make joint decisions concerning core areas of the partnership. 81 The initial term of the partnership was seven years, with subsequent automatic three-year renewals. In October 2003, the shareholders of CCorp approved the corporate and capital restructuring plan, allowing Eurex to build up the equity partnership in CCorp, 82 and resulting in the following additional changes. 83 Eurex was given one seat on the Board of Directors of CCorp; the existing shareholders elected the remaining eig ht board members. Eurex was granted the option to increase its stake to 51 per cent in the event that an outside bidder attempted to wrest control of CCorp. Finally, the guarantee function previously performed through the company capital would now be performed through a separate clearing fund. It would thus no longer be necessary to hold a stake in the clearing house to clear at CCorp. 79 The sole exclusivity related to Eurex agreeing that the US clearing of interest rate products denominated in euros or USD could only be performed through CCorp. 80 Cf. Eurex/The Clearing Corporation (eds.) (04.09.2003b). 81 This included, for example, the cross-margining of additional products with Eurex’s US products, building additional clearing links for interest rate products, changing the rules regarding the clearing of Eurex products, CCorp offering clearing services for US interest rate products for other market operators and CCorp entering into strategic alliances, joint ventures, mergers or acquisitions with competing market operators. Cf. Eurex/The Clearing Corporation (eds.) (04.09.2003a), p. 14. 82 It was agreed that the existing shareholders of CCorp would hold equity of $85 million, and thus 85 per cent of the capital base, and that Eurex would contribute $15 million. CCorp offered a share buy- back programme to allow shareholders to monetarise a certain amount of their equity interest w hile continuing to use CCorp’s clearing services. 83 Cf. Eurex/The Clearing Corporation (eds.) (04.09.2003a), pp. 13–14; and Eurex/The Clearing Corpo- ration (eds.) (04.09.2003b). 311 Checking theory against reality – case studies of network strategies Phase I ‘EU Link’ - CCorp clearing members will be able to clear CFTC-approved EU products traded at Eurex - CCorp clearing participants will be able to utilise portfolio margining between EU and US products and one common collateral pool Phase II ‘US Link’ - Clearing members of Eurex Clearing will be able to clear US products traded at Eurex US - Clearing members of Eurex Clearing will be able to utilise portfolio margining between EU and US products and one common collateral pool Phase III ‘Cross Link’ - Allow 21 hours’ trading of CFTC-approved European benchmark derivatives through listing on Eurex US - CCorp clearing participants and clearing members of Eurex Clearing will be able to clear EU products traded on Eurex US Figure 8.6 Three-phased implementation approach of the Global Clearing Link Source: Based on Eurex/The Clearing Corporation (eds.) (2004b), p. 7. Two months later, in December 2003, CCorp and Eurex announced plans to launch the Global Clearing Link (GCL) on 28 March 2004, subject to the fulfilment of applicable US and European regulatory requirements and the finalisation of all regulatory actions. As the project evolved, the following details of the clearing link initiative emerged: 84 the GCL would be introduced in a three-phased implementation following the planned launch of Eurex US (Eurex’s new US exchange) in February 2004 in order to reduce the regulatory complexity of the roll-out. CCorp would then provide clearing services for products traded on Eurex US, and the GCL would be implemented to provide additional functionality and benefits. With regard to the business purpose, Phases I and II of the GCL can be classified as a ‘Single Exchange Support’ type of link; Phase III was intended to be a ‘Cross-Listing Support’ type of link. In terms of the functional set-up, the GCL was constructed as a ‘Recognised CCP Model’, with the partner- ing clearing houses participating in each other’s systems as equals. The link set-up therefore required a medium level of functional, technical and legal harmonisation and integration. Phase I (the so-called ‘EU Link’) of the GCL was designed to enable clearing members of CCorp to clear European derivatives traded on Eurex. 85 CCorp 84 Cf. Eurex/The Clearing Corporation (eds.) (16.12.2003); Eurex/The Clearing Corporation (eds.) (04.05.2004); Eurex/The Clearing Corporation (eds.) (2004a); and Eurex/The Clearing Corporation (eds.) (2004b). 85 Note that this included only those euro-denominated European products traded on Eurex approved by the CFTC, i.e. products permitted to be traded on Eurex trading terminals in the US pursuant to a so-called CFTC ‘no action letter’. Cf. Eurex/The Clearing Corporation (eds.) (2004b), p. 7. 312 Clearing Services for Global Markets Expanded Clearing Opportunities Eurex Clearing Eurex EUR Products Eurex US USD Products EUR Products The Clearing Corporation Clearing Participants Clearing Members Global Clearing Link Cross listing of EUR- denominated products Figure 8.7 The Global Clearing Link concept (Phases I to III implemented) Source: Based on Eurex (ed.) (2004), p. 21. clearing participants would thus be able to leverage their infrastructure and utilise portfolio margining between EU and US products as well as one com- mon collateral pool. Phase II (the so-called ‘US Link’) of the GCL would then enable ECAG’s clearing members to clear USD-denominated products traded at Eurex US. These same members would then be able to utilise portfolio margining between EU and US products and one common collateral pool. Finally, in Phase III (the so-called ‘Cross Link’), euro-denominated bench- mark derivatives previously traded exclusively on Eurex would be cross-listed on Eurex US. This would then allow for twenty-one hours of trading and assure the full fungibility of these products. CCorp’s and ECAG’s clearing members would then be able to clear these European products traded on Eurex and Eurex US. The GCL, when fully implemented, was configured to allow customers of Eurex and Eurex US to choose their clearing house, provide fungibility of certain products between the two exchanges, and lever- age existing processes and infrastructures, while at the same time preserving established clearing member relationships. 86 8.1.2.4 Status of the initiative Whereas Phase I had initially been scheduled to be implemented on 28 March, the launch did not in fact take place until the end of October 2004. 87 As US authorities were busy for a long time with the approval of Eurex US and because certain aspects of the GCL required approval from regulatory author- ities in the US and Europe, the regulatory complexities translated into a far 86 Cf. Eurex/The Clearing Corporation (eds.) (04.05.2004). 87 Cf. Eurex/The Clearing Corporation (eds.) (28.10.2004). 313 Checking theory against reality – case studies of network strategies lengthier approval process than initially anticipated. The CFTC’s announce- ment on 9 July 2004 of the resignation of its acting Chairman (effective 23 July that year) 88 did not simplify matters. The implementation of Phases II and III of the GCL required CFTC action beyond what CCorp had originally requested for the first phase of the link. 89 Although the clearing houses star ted to seek approval for Phase II in March 2005, this process has not been completed to date. The main reason for the delay is that by the time the US regulators had given approval for Phase I of the GCL, Eurex US had started to suffer from decreasing volumes. By mid- 2005, as volumes traded on Eurex US continued to decline, Eurex came under increasing pressure from its parental companies to achieve a turnaround of its US business. 90 This finally resulted in Eurex selling 70 per cent of its shares in Eurex US to Man Group plc, one of the world’s largest futures brokers, in July 2006. 91 However, the implementation of Phase II lost traction not only due to Eurex US’s lack of volumes; additional US regulator y requirements – asking, for example, ECAG to apply for a DCO licence – also served to slow down the approval process. To this day, Phase II has not regained momentum. Although the application process is formally still pending – ECAG has yet to submit its DCO application to the CFTC – this project is currently unlikely to be high up on ECAG’s priority list. The volume of contracts cleared through CCorp is currently far too low to provide significant value-added for ECAG’s clearing members, even if they were given the opportunity directly to clear these contracts. 92 Part II: Analysis 8.1.2.5 Interviewees’ assessment of the case study We were very anti. And certainly most people in the London market were not in favour of it. 93 I think that is a wonderful cross-regional initiative. 94 88 Cf. CFTC (ed.) (09.07.2004). 89 Cf. Eurex/The Clearing Corporation (eds.) (04.05.2004). 90 Cf. Rettberg (2005), p. 24; and Handelsblatt (ed.) (05.12.2005), p. 33. 91 Cf. Eurex/Man Group (eds.) (27.07.2006). 92 This statement was made by the author as of April 2007. 93 Statement made by interviewed clearing member representative. 94 Interview with Edward F. Condon. 314 Clearing Services for Global Markets 23 No Value- Added GLOBAL CLEARING LINK Value- Added 15 BY INTERVIEWEE GROUP BY INTERVIEWEE LOCATION No Value- Added 12 LON 6 EU 5 US Value- Added 5 US 5 EU 5 LON 2 CH 2 EX 7 ME Value- Added 2 CM 2 NCM No Value- Added 16 CM 2 ME 3 EX 2 NCM Figure 8.8 Interviewees’ assessment of the Global Clearing Link 95 Source: Author’s own. Whereas section 8.1.1 presented the findings from the empirical study on cross-margining agreements and clearing links in general, including their suitability to integrate European clearing, this section furnishes a concrete evaluation of the GCL initiative. 96 Figure 8.8 illustrates whether or not dif- ferent stakeholders in clearing believe that the GCL provides value-added. As compared to the request for a more general assessment of clearing links, significantly fewer interviewees were knowledgeable enough about the GCL 95 Interviewee groups: CM – clearing member ; NCM – non-clearing member; ME – market expert; EX – exchange; and CH – clearing house. Interviewee locations: US – United States; EU – Continental Europe; and LON – London. 96 Note that interviewees’ judgement related to the overall success, benefits and limitations of the GCL and not to any particular phase of the GCL. 315 Checking theory against reality – case studies of network strategies to provide detailed feedback: roughly 48 per cent (thirty-eight out of seventy- nine) were able to give a concrete assessment. 97 A majority of twenty-three interviewees felt that the GCL initiative did not provide value-added, w hereas fifteen interviewees endorsed the initiative. With regard to the response rate, the group of clearing members was the best informed about the GCL; 86 per cent of all interviewed clearing members were able to provide an informed assessment of it. The NCMs and exchanges inter- viewed also proved to have a good understanding of this network initiative – in each case, 50 per cent of the respondents shared their view of the GCL. On the other hand, only 32 per cent of the interviewed market experts knew enough about the GCL to issue an assessment. Surprisingly, the interviewees who turned out to be the least informed about the GCL were the clearing house representatives; only two out of nine felt that they had a good enough grasp of the initiative to assess whether or not it provides value-added. Among the respective interviewee groups, the majority of clearing members and exchanges took a negative view of the GCL. Market experts and clear- ing houses, on the other hand, looked upon the initiative favourably. Finally, the NCMs were evenly split on the issue. With regard to location, a mere 29 per cent of the US-based respondents delivered an assessment, while 65 and 63 per cent of the interviewees located in Continental Europe and Lon- don (respectively) expressed an opinion on the GCL. Figure 8.8 shows that whereas a solid majority of the London-based respondents did not endorse the GCL, the responses from the Continental-Europe- and US-based inter- viewees were more mixed. The interviewees’ reasons for or against the GCL are analysed in detail according to the established framework in the following sections (sections 8.1.2.6 to 8.1.2.8) in order to identify the major benefits and drawbacks of this network initiative. 8.1.2.6 Scale Impact Matrix In accordance with the framework developed in Chapter 7, the first step in the efficiency assessment of the Global Clearing Link (GCL) consists of establishing the Scale Impact Matrix (SIM). For this purpose, the magnitude of supply-side (section 8.1.2.6.1) as well as demand-side (section 8.1.2.6.2) scale effects is analysed. This enables the derivation of the SIM for the GCL (section 8.1.2.6.3), whose results will be compared to the conclusions of the analysis in section 7.1. 97 The remaining either felt that they had insufficient knowledge about the GCL, had no clear opinion or did not specify their opinion. 316 Clearing Services for Global Markets NETWORK STRATEGY The Global Clearing Link - ECAG - COST IMPACT LOW TO MEDIUM LOW Medium-Term Investment SCALE INCREASE SCOPE INCREASE ECONOMIES OF SCALE ECONOMIES OF SCOPE LOW TO MEDIUM LOW The Global Clearing Link - CCorp - LOW TO MEDIUM LOW TO MEDIUM Medium-Term Investment LOW LOW TO MEDIUM Figure 8.9 Assessment of economies of scale and scope in the Global Clearing Link Source: Author’s own. 8.1.2.6.1 Analysis of supply-side scale effects Analysing the supply-side scale effects related to the GCL initiative entails the assessment of both the cost impact for the partnering clearing houses 98 and the realised increase in scale and scope. Doing so allows conclusions on the economies of scale and scope for both CCPs, which in turn enables the derivation of the GCL’s net supply-side scale effects for the two clearing houses. For ECAG, the implementation of Phase I of the GCL gave r ise to low to medium economies of scale and low economies of scope. This assessment is due to the combined factors of the medium-term investment required to implement the EU Link, a low to medium scale increase and a low scope increase. For CCorp, however, the implementation of Phase I of the GCL resulted in low economies of scale and low to medium economies of scope. This assessment is attributed to the medium-term investment required from CCorp to implement the EU Link and a low to medium scale and scope increase, respectively. Phase I of the GCL allows members of CCorp to clear a range of European products traded on Eurex through their existing relationship with CCorp. Whereas this resulted in a greater number of technical, operational and legal 98 Due to the lack of publicly available cost data on either clearing house, no detailed cost or unit cost development analyses can be performed. The following classification is utilised for this purpose: short- term investments entail a one- to two-year amortisation period, medium-term investments a three- to six-year amortisation period and long-term investments an amortisation period equal to or greater than seven years. 317 Checking theory against reality – case studies of network strategies adaptations and expenses for CCorp than for ECAG, 99 the particularities of this clearing link initiative included the reimbursement of software develop- ment costs from Eurex Frankfurt AG to CCor p. 100 In terms of investments, this clearing link initiative benefited from the fact that CCor p had already established an interface to the a/c/e system and that the CCPs coop erated on the basis of an outsourcing agreement that served to minimise the impact of link-related software development costs. 101 It is thus assumed that the average development costs that both clearing houses had to bear in the context of the GCL initiative are roughly comparable and can be classified as medium-term investments. 102 Note that besides investments in the clearing system itself, the implementation of Phase I and the preparatory work for Phase II gave rise to additional costs, mainly legal expenses; the fact that the partnering clearing houses were subject to different regulatory regimes created a number of hurdles and complexities. This translated into legal costs to solve regula- tory hurdles associated with the clearing link initiative. Nonetheless, these 99 The opposite is true for Phase II of the GCL, as this would have enabled ECAG’s members to clear USD products traded on Eurex US through their existing clearing relationship with ECAG. The implementation of Phase II would have thus required ECAG to deal with a greater number of technical, operational and legal adaptations than CCorp. Although Phase II has not been implemented to date, both clearing houses had already started to engage in the development of necessary changes by the end of 2004 and in 2005. In 2005, ECAG wrote these costs off as extr aordinary depreciation. Due to the unavailability of detailed cost data, it is impossible to isolate concrete figures, but DBAG’s annual report suggests that these development costs ranged between €0.5 million and €8million.Cf.Deutsche B ¨ orse Group (ed.) (2006a), pp. 150–51. 100 Whereas DBAG’s annual report reveals that in 2004, Eurex Frankfurt AG reimbursed CCorp with €2.3 million for software development costs, it falls short of specifying whether these costs related solely to Phase I or also included expenses incurred from Phase II of the GCL. It is also unclear what percentage of CCorp’s total GCL-related costs this amount compensates for. Cf. Deutsche B ¨ orse Group (ed.) (2005b), p. 194. 101 Generally, clear ing links can, but do not necessarily have to, operate on the basis of outsourcing agree- ments. Outsourcing agreements enable the away clearing house to act legally as central counterparty to its clearing members’ transactions in the home clearing houses’ contracts, which are available for clearing through a link, without actually technically performing these services. In the context of out- sourcing agreements, the home clearing house thus continues to perform technically all or most of the clearing serv ices. 102 DBAG’s annual report of 2004 specifies that changes for the Global Clearing Link were introduced with Eurex Release 7.0 in 2004. Cf. Deutsche B ¨ orse Group (ed.) (2005b), p. 56. GCL-related costs are classified as medium-term investments, because DBAG’s annual reports of 2004 to 2006 reveal that average costs for a software release are roughly between €5and€10 million, with an average depreciation over four to five years. Cf. Deutsche B ¨ orse Group (ed.) (2005b), p. 156; Deutsche B ¨ orse Group (ed.) (2006a), p. 150; and Deutsche B ¨ orse Group (ed.) (2007a), p. 156. As Eurex operates an integrated trading and clearing platform, every new software release is thus composed of trading- and clearing-related system changes. It isconsequently assumed that the GCL-related software development costs were lower than €10 million and depreciated over a shorter period. 318 Clearing Services for Global Markets project-related costs did not impair the realisation of economies of scale and scope. The scale increase realised by ECAG during Phase I is classified as low to medium for the following reasons. Prior to the launch of the EU Link in October 2004, Eurex asserted that more than 10 per cent of its total volume was generated by US users; this figure was expected to grow to almost 20 per cent over the years following the introduction of the GCL. 103 This means that in 2004, prior to the launch of Phase I, roughly 107 million contracts were generated by US-based users. 104 An increase in scale as expected would have translated into approximately 125 (153) million contrac ts cleared through the link in 2005 (2006) – which would have been classified as a high to very high scale increase. According to CCorp, it processed and cleared a much lower number of contracts through Phase I of the GCL, i.e. roughly 10 (13) million contracts in 2005 (2006), 105 which is classified as a low to medium scale increase. 106 Note that Eurex’s initial estimate of an increase in European products generated by US-based users as a result of the GCL was predicated not only on volume increases potentially realised through Phase I, but also on increases expected to be generated from cross-listing in Phase III, which was never realised. Additionally, Eurex did not specify the time frame for the expected growth rates. Although CCorp also benefited from a low to medium increase in the number of cleared contracts through Phase I of the GCL, this scale increase did not translate into an equally g reat magnitude of economies of scale – which is due to CCorp’s particular position. At the time of the EU Link’s introduction, CCorp suffered from a continuously shrinking scale, mainly resulting from the CBOT’s move to the CME clearing house and the stagnating development of Eurex US. By the end of 2004, annually cleared volumes were only roughly 1.4 per cent of the volumes processed the previous year. In 2005, one year after the launch of the EU Link, volumes continued to decline, reaching only 0.5 per cent of the volumes processed in 2003. Whereas the European contracts processed through Phase I of the GCL benefited CCorp, as every contract 103 Cf. Morgan Stanley (ed.) (2004), p. 4. 104 For regulator y reasons, US-based entities cannot become clearing members of ECAG. Prior to the introduction of Phase I of the GCL, they therefore had to employ a clearing intermediary that was a member of ECAG to clear their t rades executed on Eurex. The EU Link has since enabled US-based entities to clear their trades executed on Eurex without necessarily having to employ an intermediar y by clearing through CCorp. 105 Cf. The Clearing Corporation (ed.) (19.12.2006). 106 This means that in 2005 (2006), only roughly 0.8 (0.9) p er cent of ECAG’s cleared volume originated from the use of Phase I of the GCL. [...]... increase, their low efficiency gain translates into a low to medium profit increase Clearing 148 The associated efficiency gains are too minimal and are unlikely to impact the level of prop or agency trading and thus clearing Phase I of the GCL also failed to provide regionally-to-globally active clearing members of ECAG with the opportunity to disintermediate their clearer in other markets to leverage their... structure, scope and particularities of the clearing link; (ii) the resulting attractiveness of disintermediation through the clearing link; and (iii) whether decreases in revenues outweigh the efficiency gains The analysis of the TCIMs showed that the cost impact of the EU Link for globally active clearing members is zero to very low Clearing members with a 342 Clearing Services for Global Markets prop... The unrealised potential for a significant reduction of indirect transaction costs of CCorp’s regionally-to-globally active clearing members is a direct result of the limitations and drawbacks of the GCL initiative (as outlined in section 8.1.2.6) 8.1.2.7.3 TCIM for globally active clearing members Figure 8.16 exhibits the TCIM for Phase I of the GCL for globally active clearing members of ECAG and CCorp,... reasons are summarised in the following Globally active clearing members confirmed the findings from Chapter 7, affirming that they have very little interest in utilising clearing links with a limited functionality and scope, such as the EU Link These types of clearer have already established a global presence that enables them to clear internally all of the most important marketplaces worldwide The global. .. suite available to CCorp’s clearing members The benefits of using CCorp instead of ECAG as a clearing house are consequently not compelling for these clearers The unrealised potential for a significant reduction of indirect transaction costs of globally active clearing members is a direct result of the limitations and drawbacks of the GCL initiative (as outlined in section 8.1.2.6) Consequently, not a single... 3.2.2.1 for details on segregation and its potential impact on the clearing members’ cost of capital 321 Checking theory against reality – case studies of network strategies houses to accept anything other than the clearing members’ own collateral (i.e German clearing houses cannot support segregation) As outlined above, non-segregated customer accounts can translate into increased cost of capital for. .. internal prioritisation of implementing the link, the negative impact of insignificant volumes on Eurex US, the erosion of CCorp’s installed base, the mandatory open interest transfer from 330 Clearing Services for Global Markets CCorp to the CME clearing house, regulatory and political issues as well as competitive dynamics created further uncertainty about the future development of the initiative and... customers access to only one European marketplace (i.e the Eurex markets) Activity in any market other than that of Eurex thus requires the deployment of a European clearing intermediary.121 All it is is a cheaper way of offering GCM services, at the end of the day And the reason that the link doesn’t have more customers is because the link is only with Eurex, but a customer who trades multiple exchanges... positive future network effects and thus aggravated the starting problem All of these elements resulted in a significant amount of unrealised potential, as outlined in Figure 8.13 8.1.2.7 Transaction Cost Impact Matrix and Efficiency Impact Matrix The Scale Impact Matrix revealed that different network strategies have varying potential for the realisation of network effects and economies of scale and scope The. .. clearing link initiative depends on the following factors: (i) the concrete structure, scope and particularities of the clearing link initiative; and (ii) the clearer’s internal set-up and structure, the level of complementary (banking) services they receive from their clearing intermediary and the resulting business case to assess the attractiveness of disintermediating their GCM The analysis of the . enable the away clearing house to act legally as central counterparty to its clearing members’ transactions in the home clearing houses’ contracts, which are available for clearing through a. already established a global presence that enables them to clear internally all of the most important marketplaces worldwide. The global clearers already had the efficiencies in-house, within their. thus requires the deployment of a European clearing intermediary. 121 All it is is a cheaper way of offering GCM services, at the end of the day. And the reason that the link doesn’t have more customers