Skytra, a wholly owned subsidiary of Airbus, has selected Nasdaq Clearing AB as the central counterparty (CCP) for its new derivatives trading platform aimed at allowing the global air travel industry to hedge revenue risk for the first time. As the trading venue’s CCP, Nasdaq Clearing will become the counterparty to all derivative contracts traded on Skytra’s MTF. Under the clearing services agreement, Nasdaq Clearing will provide all the necessary post-trade services. These services help safeguard operational efficiency and financial stability through the collateralisation of its members’ positions, in order to ensure that counterparty credit and market risks are measured and managed and the impact of a counterparty default is minimised.
Nasdaq Clearing is one of Europe´s leading clearing houses authorised under the European Market Infrastructure Regulation on derivatives, central counterparties and trade repositories (EMIR) and its appointment is the result of a competitive tender to establish the most suitable partner to support Skytra’s ambitions. It follows Skytra’s selection of Nasdaq to provide the core technology for the trading venue, as announced in January 2020.
Mark Howarth, CEO, Skytra, says: “Covid-19 puts the spotlight on the air travel industry’s many challenges in managing revenue risk. Nasdaq Clearing’s selection is another important step forward in the development of our new derivatives trading platform for the benefit of the industry. Its existing relationships with clearing members and default fund provisions were important factors in its selection as well as the advantages of integrating its clearing services alongside the infrastructure provision for our trading platform.”
Julia Haglind, President, Nasdaq Clearing, says: “Skytra, working with Nasdaq’s clearing and technology services, is creating new opportunities for the global air travel industry to manage risk and revenue. With our forward-thinking technology mindset, our work to support Skytra in creating a ground-breaking endeavour will help transform the air travel industry’s risk management practices.”
The new trading venue is designed to allow the air travel industry to manage the volatility of revenues caused by the increasingly short-term nature of ticket sales and a multitude of other external factors. This lack of visibility on revenue is a major challenge for an industry that has to make long-term financial commitments. Skytra has spent more than two years compiling a global family of air travel price indices, which it will use to price the futures and options contracts on the trading venue.
Skytra is in the process of applying to the UK’s Financial Conduct Authority for approval to operate a Multilateral Trading Facility (MTF) and to be registered as a Benchmark Administrator for its price indices. In parallel, Nasdaq Clearing will apply separately for regulatory approval from its regulator, the Swedish FSA, to act as the CCP to Skytra’s MTF.