NYSE Euronext Bringing Derivatives Clearing In-House in Europe
(NEW YORK/PARIS) NYSE Euronext said it will bring the clearing of all futures, options and other derivatives contracts in Europe in-house, by 2014, Securities Technology Monitor recently reported.
All clearing of contracts on its NYSE Liffe derivatives market, at the end of the transition, will be conducted by a central counterparty called NYSE Liffe Clearing. LCH.Clearnet will be given 12-months notice of the intended change, when the clearinghouse is completed. The London clearinghouse provides banking, guarantee and default management services to NYSE Liffe, currently. LCH.Clearnet will continue to clear stock trades for NYSE Euronext.
“Our clients have long asked for a consolidation of clearing arrangements and the strength of our European derivatives business allows us to deliver meaningful benefits for them in the form of capital efficiencies and savings,” said Duncan Niederauer NYSE Euronext CEO. “Formalizing these steps now and communicating them clearly to our customers will allow them to more effectively plan their capital allocation needs and will enhance their operational stability in a highly competitive and fluid environment.” NYSE Euronext said it expects to invest $85 million over the next two years, of which nearly $60 million will be capital spending. Bringing derivatives clearing in-house will result in about $30 million a year in savings, NYSE Euronext said.
The company last year planned to bring clearing in-house by merging with Deutsche Boerse, which has a European clearing operation known as Clearstream. That merger was not completed. NYSE Euronext said it also expected “new revenue streams will accrue from 2014” onward in post-trade businesses, as a result of having its own clearing operation for derivatives. It cited the clearing of what are currently over-the-counter contracts in interest-rate, credit-default and other swaps. NYSE Euronext said it expects its clearinghouse in London to be completed, licensed and operational by the summer of 2013.
The company intends to give 12 months termination notice to LCH.Clearnet Ltd. in mid- 2012, as a result. Clearing for NYSE Euronext’s derivatives business in Amsterdam, Brussels, Lisbon and Paris, currently cleared with LCH.Clearnet SA in Paris, will be transferred to the new facility in London early in the first quarter of 2014. NYSE Euronext intends to negotiate a new long term arrangement with LCH.Clearnet SA, for the clearing of European equities trades. The new agreement would replace the current agreeemtn, which ends in December 2013. “LCH.Clearnet will work collaboratively with NYSE Euronext, clients, market participants and regulators to ensure a smooth transition and continuation of clearing services,’’ Ian Axe, CEO of LCH.Clearnet said.
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