NYSE Euronext’s decision to stop using LCH.Clearnet and create two new clearing houses of its own will lead to a substantial change in the European derivatives clearing landscape, and will feed into the debate about interoperability.
The Financial Services Authority is in the process of reviewing interoperability between clearing houses in the UK. Interoperability means giving exchange users the right to choose where their trades are cleared. They might then choose to use a central counterparty (CCP) in their domestic market, for example, rather than having to use the clearing house favoured by the exchange.
A market participant sympathetic to LCH.Clearnet argued that NYSE’s move was meant to enable it to control clearing for all trades on its platforms. “It’s about competitive advantage,” said the source, “about control of clearing, and about control of what’s traded on your market.”
From this perspective, the...