NYX Nyse Euronext

The head of NYSE Euronext (NYX), which confirmed last week its participation in a takeover approach to LCH.Clearnet Group Ltd., on Friday said he believes the London-based clearing firm will ultimately "stand alone."

The Big Board parent confirmed last week it had joined with market data firm Markit Group Ltd. in an proposal to buy LCH.Clearnet, one of several proposed deals for the company that processes trades in securities, futures and the $465 trillion interest-rate swap market.

Chief Executive Duncan Niederauer made the remark at the Sandler O'Neill Global Exchange and Brokerage Conference here, speaking to reporters. Nasdaq OMX Group Inc. (NDAQ) and London Stock Exchange Group PLC (LSE.LN) were also reported to have submitted bids, though LSE subsequently distanced itself from any talks.

A spokeswoman for LCH.Clearnet declined comment Friday.

LCH.Clearnet is a London clearing firm about 80% owned by its users, which include the biggest dealer banks in the world, alongside stakes held by NYSE Euronext and the London Metal Exchange, which together own about 17%.

LCH's disparate ownership group has made previous dealmaking difficult. An effort by the U.S.-based Depository Trust & Clearing Corp. ran aground in 2009 after a rival bid emerged from a consortium of banks led by the inter-dealer broker Icap PLC (IAPLY, IAP.LN). LCH.Clearnet ultimately chose to remain independent, and converted to a utility model.

Some of LCH.Clearnet's biggest exchange customers have pulled away their business in recent years, which has been seen applying pressure to LCH.Clearnet's viability. NYSE Euronext announced last year that it would move to build its own clearinghouse functions in the U.K. and Europe, which would see it ending its longstanding relationship with LCH.Clearnet.

The London Stock Exchange Group PLC (LSE.LN) and London Metal Exchange have also eyed constructing their own clearing units. The move would give exchange groups additional revenue from clearing trades on their own markets, and more control over the launch of new products and services.

The Markit-led approach to buy LCH.Clearnet would have seen NYSE Euronext raise its stake in the business to 30% to 40%, according to people familiar with the matter, and would have brought the exchange company closer in-line with dealer banks that control much of the business in over-the-counter derivatives products.

Exchanges are pushing to develop clearing services to handle transactions in off-exchange markets, which far outsize the on-exchange derivatives market. LCH.Clearnet maintains a long-dominant position in clearing interest-rate swaps trading, the biggest segment of the $601 trillion OTC derivatives market.

NYSE's Niederauer said last week that raising its ownership in LCH.Clearnet, in conjunction with Markit, would help build its partnership with dealers. Banks number among the ownership of both groups.

NYSE Euronext's progressing merger with Deutsche Boerse AG (DB1.XE, DBOEF), is not seen affected by any deal for LCH.Clearnet, according to Niederauer.

-By Maxwell Murphy and Jacob Bunge, Dow Jones Newswires; 212-416-2171; maxwell.murphy@dowjones.com

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