The decision of Liffe and Intercontinental Exchange (ICE) to
launch their own clearinghouses has propelled the issue into
the limelight once again. As a result, the talk on many
peoples lips has been the ongoing debate
horizontal or vertical clearing?
However, with exchanges and clearinghouses engaging in a
round of public mudslinging, all brokerages want is the ability
The vertical versus horizontal clearing debate is not
exactly new. However, when ICE and Liffe said that they would
divorce European clearer LCH Clearnet and launch their own
clearing operations, ICE Clear and Liffe Clear, respectively,
the debate resurfaced with a vengeance. Both the Atlanta-based
exchange and Liffe argued that the decision was purely business
and necessary to keep pace with its global competitors.
Of course, while the model of vertical clearing seems to be
en vogue, the independent clearinghouse has its own heavyweight
supporters, none more so than Clara Furse, chief executive at
London Stock Exchange, who has publically declared that
horizontal clearing must be protected.
Anti-competitive behaviour in the post-trade
environment can easily foreclose competition in the trading of
derivatives, where any protection of extended open positions
makes such competition uneconomic, Furse wrote in the
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