NYSE Liffe Clearing Sees July Launch, Will Rebate Some Fees
May 27 2009 - 10:56AM
Dow Jones News
NYSE Euronext (NYX) will launch its London-based derivatives
clearinghouse on July 27 after receiving approval from the U.K.
Financial Services Authority on Wednesday.
NYSE Liffe Clearing plans to keep clearing fees at their current
level for three years, during which time the exchange will rebate
to members up to half the income from interest on margin posted at
the clearinghouse, according to Declan Ward, executive director of
NYSE Liffe.
Wednesday's in-principle approval from the FSA still requires
NYSE Liffe, the London-based derivatives exchange, to formalize
legal details around migrating its business from LCH.Clearnet, the
U.K. clearing entity that has handled the exchange's trades up to
this point.
Under the new relationship, LCH.Clearnet will continue to
provide risk management, settlement and banking services, which
includes overseeing NYSE Liffe Clearing's guarantee fund.
According to Ward, the services will be provided through a
straightforward commercial contract with LCH.Clearnet.
Ward said that because NYSE Liffe Clearing will operate on
existing systems and infrastructure, clearing members won't need to
migrate to a different system or capitalize a new guarantee
fund.
"Essentially, we flip a legal switch and we're off," said
Ward.
While NYSE Liffe Clearing will take over all derivatives trading
on NYSE Liffe, LCH.Clearnet will continue to clear trades in NYSE
Euronext's European cash equities products.
NYSE Liffe is the second exchange in recent months to route
business away from LCH.Clearnet, after Atlanta-based
IntercontinentalExchange Inc. (ICE) launched its own European
clearinghouse last fall to handle trades on ICE Futures Europe.
In response, LCH.Clearnet is pushing to clear more equities
trades on Europe's multi-lateral clearing facilities, while ramping
up its interest-rate swap clearing business and opening an office
in New York to gauge U.S. opportunities.
For NYSE Liffe, the foray into clearing gives the exchange
operator another source of revenue at a time when derivatives
trading activity remains suppressed by the credit crisis.
Average daily volume on the exchange fell 12.7% year-on-year in
April, with interest rate futures down 27.1% and commodity futures
down 22.7%. Equity index futures trading came in 9.5% higher.
-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117;
jacob.bunge@dowjones.com