Pan-European stock exchange Euronext has signed a binding agreement of terms with LCH SA, LCH Group and London Stock Exchange Group for the continued provision of derivatives and commodities clearing services.
The deal, which is expected to be formalised in the coming weeks, comes several months after Euronext failed to acquire the Paris-based LCH Clearnet SA. The agreement will see the exchange server maintain its ties with the French clearing arm of the London Stock Exchange Group for the purpose of derivatives clearing when their current agreement comes to an end in December 2018.
The renewal deal, which covers clearing for financial and commodity derivatives over an additional 10-year period, will see Euronext and LCH SA work together to develop new products and reduce the clearing fees by 5% to 15% effective January 2019.
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Under the new agreement, Euronext will also swap its current 2.3% stake in LCH Group for an 11.1% stake in LCH SA, subject to regulatory approvals and other customary conditions.
Euronext was due to buy the Paris-based LCH Clearnet SA for €510 million in January to pave the way for the merger between Deutsche Börse and the London Stock Exchange. But the merger offer was blocked by EU antitrust commissioners on the grounds that it would create a monopoly in fixed income markets.
Suneel Bakhshi, CEO of LCH Group, commented: “Announcing this agreement is a significant achievement for the Group and highlights the spirit of strong partnership with Euronext. We are delighted to be able to offer continuity of services for clearing members and clients while also delivering best in class service and robust risk management across a range of cash and derivatives markets, in line with our open access principles. The implementation of MillenniumIT’s clearing technology will deliver a common technology and integrated solution for our clearing members and venue partners, enhancing resiliency and efficiency for the Group.”
Christophe Hemon, CEO of LCH SA, added: “We are delighted to have reached agreement to continue providing clearing services to Euronext and its customers. Euronext’s transfer of its shareholding in LCH Group to LCH SA will also further deepen our long-standing relationship. The agreement will provide certainty for existing clearing members and clients and we look forward to working with Euronext and other trading venues to develop LCH’s clearing franchise, developing new products and reinforcing the diversified range of products cleared across asset classes including equities, CDS and repos.”