News Releases
NYSE Euronext Announces European Clearing Strategy
New, purpose-built clearing houses to be established in London
and Paris
Clearing relationship with LCH.Clearnet Group to cease in
2012
Amsterdam, Brussels, Lisbon, London, New York, Paris - Wednesday
12 May 2010 - NYSE Euronext today announced 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.
LCH.Clearnet Ltd in London and LCH.Clearnet SA in Paris have been
informed that NYSE Euronext's current contractual arrangements for
clearing with them will terminate accordingly at that time. No
termination fees or penalties will be payable.
The new clearing houses are part of NYSE Euronext's strategic
plan to offer clearing services in the UK and in the Eurozone.
These clearing houses will complement NYSE Euronext's diverse cash
and derivatives trading business. The clearing of NYSE Euronext's
European business will also be re-aligned along asset class lines
better to meet customers' needs, so that the new clearing house in
London will clear listed interest rate, commodities and FX products
and the new clearing house in Paris will clear equities and
equities derivatives products.
The execution of this strategy will bring the following benefits
for NYSE Euronext customers: (a) the implementation of common
clearing systems, developed from a base of existing operational
technology so as to keep migration frictions as low as possible,
across all of NYSE Euronext-listed asset classes, will provide for
operational savings for customers over the current arrangements;
(b) the better distribution and aggregation of risk-correlated
instruments among the two new clearing houses (one operating under
English law, one operating under French law) will provide for
capital savings over the current arrangements; and (c) attractive
economic terms.
The new arrangements will also bring benefits to NYSE Euronext
shareholders. The new strategy builds on the first step taken with
the creation of NYSE Liffe Clearing in 2009, by which NYSE
Euronext's wholly-owned subsidiary, NYSE Liffe, began clearing its
own London-listed derivatives business as a self-clearing
Recognised Investment Exchange, while outsourcing its banking,
guarantee and default management arrangements to LCH.Clearnet Ltd.
Under the new strategy, NYSE Euronext will move wholly away from
all of its outsourced contractual arrangements with LCH.Clearnet
Group Ltd's subsidiaries in London and Paris to a situation in
which NYSE Euronext has control over the clearing operations and
development of its cash and derivatives businesses in Europe. NYSE
Euronext also intends to extend clearing services to OTC markets
and certain other trading platforms on attractive and competitive
commercial terms.
To build its two new clearing houses, NYSE Euronext expects to
invest up to US$60m until the end of 2012, some of which will be
capital expenditure. From 2013 onwards, NYSE Euronext estimates
that it will realize: (i) additional revenues of at least US$100m
annually from insourcing its Euronext markets securities and
derivatives clearing business; and (ii) significant annual cost
savings from insourcing those clearing services currently provided
to NYSE Liffe by LCH.Clearnet Ltd.
While construction of the new clearing houses de novo
progresses, NYSE Euronext also remains open to discussions on any
potential restructuring of LCH.Clearnet Group Ltd, and/or its
subsidiary companies. Should any such discussions lead to a firm
conclusion that such a restructuring route, in respect of clearing
activities in London and/or Paris, could offer greater benefit to
NYSE Euronext's customers and shareholders than continuing de novo
construction, this matter would be thoroughly reviewed by NYSE
Euronext's board and further announcements made as appropriate.
Duncan Niederauer, NYSE Euronext's Chief Executive Officer said,
"After an in-depth strategic review, we concluded that we should
improve our clearing arrangements while maintaining our current
regulatory relationships in Europe. This is an exciting and
enterprise-transforming project that will greatly benefit our
customers and further enhance the company's presence in Europe's
two most important financial centres, London and Paris. After
successfully commissioning our new mission-critical trading
infrastructure, UTP, across all of our businesses globally, we are
now committed to investing similarly in mission-critical post-trade
infrastructure in Europe."
Dominique Cerutti, NYSE Euronext's President, added, "We intend
to work with all our customers to ensure that we deliver a
competitive, state-of the-art clearing solution that meets their
needs both for listed and OTC, underlying and derivatives, markets.
While we are building the new clearing houses over then next 30
months, we will also maintain regular, close dialogue with
LCH.Clearnet Group. The continuing operational integrity of the
current arrangements and the smoothest and most efficient
transition to new arrangements are of the highest importance to
NYSE Euronext. We will maximize synergies for our customers and our
shareholders whenever we can."
During the project, NYSE Euronext will also continue to play its
part in the ongoing dialogue with European regulators and
policymakers with the aim of ensuring that new legislation and
regulatory standards that may be implemented: (a) deliver
systemically safer and better risk-managed markets; and (b)
continue to allow innovation, investment and competition in
Europe's market infrastructure.
NYSE Euronext will be liaising regularly with regulators and
customers throughout the development of this project. Further
communications will be provided in due course.
Contact: Eric Ryan
Phone: 212.656.2411
Email: eryan@nyx.com