The Latest in Exchange Mergers - Clearing Firms

May 28th, 2011
in econ_news


Caption photo:  City of London financial district.

 Econintersect:   Clearing houses have been out of the limelight in all the attempted stock exchange mergers and acquisitions that have been going on around the world in recent months.  That is no longer the case.  Three of the world’s largest exchanges have entered a battle for control of LCH.Clearnet.   NYSE Euronext, Nasdaq OMX and the London Stock Exchange have all made bids.

Follow up:

Clearing houses stand to have a dramatic increase in business because of financial system reforms that will force over-the-counter derivatives to be traded on exchanges and through clearing houses to make such markets more transparent.

From the Financial Times:

A clearing house stands between buyers and sellers, stepping in to ensure a deal is completed if one party defaults. The London clearer was formed from a merger in 2003 between the London Clearing House and Clearnet, clearer for the Paris Bourse.

All three bidders want control of LCH.Clearnet since it operates, with big banks, a clearing service for OTC interest rate swaps called SwapClear, which recently pushed into the US to compete with CME Group, the US exchange, in derivatives clearing. Interest rate swaps are the largest part of the OTC derivatives market and are set for growth, market experts believe, as they are pushed on to electronic platforms by the reforms.

LCH.Clearnet Ltd in London and LCH.Clearnet SA in Paris have previously been informed that NYSE Euronext’s current contractual arrangements for clearing with them will be terminated before the end of next year.  Euronext announced in December that, subject to regulatory approval, it will commence clearing its European securities and derivatives business through two new, purpose-built, clearing houses based in London and Paris in late 2012.

Sources:  Financial TimesNYSE Euronext Press Release, GEI News and Securities Technology Monitor  

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