) is planning to start clearing non-deliverable forward (NDF)
currency trades in Europe. NDFs facilitate trading in currencies
such as the Chinese yuan and Indian rupee that are not free to
trade. NDFs are classified as swap trades under the Dodd-Frank
Act rather than plain vanilla derivative trades which make
them subject to the new clearing rules. The move will put Nasdaq in
competition with LCH.Clearnet and
) who have already finalized their offerings for NDF clearing.
Nasdaq OMX is the second largest stock exchange operator in the
world behind NYSE Euronext (
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The regulations governing European market infrastructure
are currently in discussion in the European Parliament
and are expected to be similar to the Dodd-Frank Act
which categories these instruments as swaps and require them
to go through a central clearing house from the end of
2012. Nasdaq has applied for UK Financial Services Authority
recognition for its existing European clearing house in
Stockholm which would allow London based financial
institutions to become direct clearing members.
New clearing rules have presented big business opportunity for
exchanges with clearing houses. These exchanges can offer clearing
for exchange traded products along with privately traded
derivatives contracts which would be a cost effective solution for
many banks that clear both instruments together.
We have a price estimate of $25.84 on Nasdaq OMX's stock,
about the same as the current market price.
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