The confirmation that LCH.Clearnet, Europe’s largest independent clearing house, has been approached by a number of potential partners for a business combination underlines the nature of the shifts taken place in Europe’s clearing landscape.
Exchange groups, losing out on revenues, are looking to capitalise on their diminishing profits generated by trading on their platforms by building or buying their own clearing houses, alongside licensing their technology. The downside is that this siloed approach by exchanges threatens the independent model of LCH.Clearnet.
GreySpark points out that the lines between clearer and trader have been blurred – it is essentially going to be difficult to keep clearing and trading separate now, and inevitably independent clearers like LCH.Clearnet will be lost.
While LCH.Clearnet being owned by an exchange is not ideal, the reality is that in Europe this is now the norm, with market participants not wishing to be left alone with Eurex. The conception is that integrated trading and clearing would be efficient, however the fate of this is in the hands of the regulators.