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