Garbi's grab

Garbi, the 31-year-old technology whiz who created EuroMTS in the late 1990s as an offshoot of Italy's Mercato dei Titoli di Stato, has singlehandedly changed European government bond trading. Nearly half of all such trading is now conducted through Garbi,s online bourse, EuroMTS; on March 6 the platform set a one-day record of E10.2 billion ($9 billion) in volume.

Now that he stands so tall in trading, Garbi is turning his attention to Europe's fragmented clearing systems. Like other technology-savvy exchange operators on both the equity and fixed-income sides, Garbi supports the idea of a single central counterparty for European securities, along the lines of the U.S.,s Depository Trust and Clearing Corp. But his tactics have some observers scratching their heads.

Last month EuroMTS announced that its Italian marketplace, MTS, had signed an agreement with France's Clearnet as well as Italy,s Cassa di Compensazione e Garanzia to handle the clearing of Italian government bonds. In effect, EuroMTS has endorsed Clearnet, an 80 percent-owned subsidiary of multinational stock exchange Euronext, over its principal rival, London Clearing House. Indeed, EuroMTS has also recommended that its Belgian, Dutch, Portuguese and Spanish units use Clearnet, which already handles all French government bond trades.

Central clearing is relatively new to the European bond markets, and Garbi's tilt toward Clearnet could have a major impact on the evolving market structure. London Clearing House, best known as the clearing agency for the London Stock Exchange and Liffe, had been the only significant player, through

RepoClear, a system it developed with participants in the repurchase agreement market.

A broad bond market consensus favors consolidation. Says Ed McAleer, head of European repo trading at Morgan Stanley in London: "The one thing we all know is that it's 3.5 times as expensive to trade cross-border for the same ticket size in Europe as it is in the U.S. Most of those costs are incurred after the trade gets done, in the middle and back office."

但是，如果目标是通过创建一个中心公用设施和最大化通过它的交易量来最小化交易成本，那么为什么Garbi没有走在前面呢？LCH每天清算1000亿欧元的欧洲债券，大约是Clearnet的20倍。

For the biggest dealers, repos and cash bonds go well together: The same bonds are used to trade with investors and other dealers or as collateral to raise money. As a result, clearing repo and cash trades through LCH's RepoClear makes sense, says Morgan Stanley's McAleer. "The bottom line is that users get the maximum benefit from netting if it is concentrated in one place, because it reduces risk, makes the optimal use of our collateral, and we get the maximum efficiency," he explains. "I don,t see why anyone would choose to clear repos in one place and cash bonds in another."

Garbi insists that he is not attempting to drive LCH out of the market; he maintains that strengthening Clearnet will be a catalyst for consolidation. "By aggregating Italian and French government bond clearing in Clearnet, there is now a central counterparty with critical mass to challenge LCH. We think that makes a merger between LCH and Clearnet more likely," Garbi says.

Arun Aggarwal, who heads business development at LCH, agrees in principle. "It is no secret that we have held discussions with Clearnet exploring the idea of a merger. Now that it is a larger competitor, that gives us more reasons to talk," says Aggarwal. But "that seems like an odd motivation for EuroMTS," he adds.

所有这些策略都让欧洲MTS的客户感到困惑。不过，他们有权决定结果，摩根士丹利的麦克莱尔认为，简单的商业考虑将占上风。例如，意大利以外的MTS参与者可以拒绝Garbi的Clearnet建议。

If the Clearnet and LCH systems eventually merge, Garbi might deserve some credit for improving European market efficiency. But he needs others to buy into his vision , and not resent his headlong leap into the muddy waters of European exchange politics.