The London Metal Exchange (LME) will be migrating contracts
to its own clearing house in September 2014, terminating its
long-standing deal with LCH.Clearnet writes Jonathan
LME has worked with the transatlantic clearing house for the
last 25 years but is now following some of
Europe’s largest derivatives exchanges in
establishing its own clearing platform.
As FOWi reported earlier this week,
NYSE Liffe will also be terminating its deal
with LCH.Clearnet in July when it transfers its business to
ICE Clear Europe.
Clearing competition is heating up in the European
derivatives market, as exchanges look to benefit from the new
wave of business resulting from regulatory reform.
LME will continue to clear through LCH.Clearnet until 22
September 2014, when the migration to LME Clear will take
"LME Clear and LCH.Clearnet teams have worked together to
plan a controlled, efficient migration of services to the
LME’s new clearing service," said Trevor Spanner,
managing director of post trade services at LME Clear.
"Ensuring continued market stability and minimising
disruption for members were driving principles behind our
The departures of Liffe and LME coincide with the clearing
business being adopted by London Stock Exchange group and
the new London venue, Nasdaq OMX NLX.
LCH.Clearnet has also launched its interest rate swaps
clearing service in the US and received regulatory approval to
provide clearing services for the Financial and Energy Exchange
(FEX) in Australia.
"LCH.Clearnet and the LME have enjoyed an excellent working
relationship over the last 25 years, and have agreed a
carefully negotiated migration plan to ensure a smooth
transition process," said Alberto Pravettoni, CEO of
LCH.Clearnet’s repo and exchanges business.
Big name backing
In line with the new requirements
under the European Market Infrastructure Regulation (Emir),
Bank of America Merrill Lynch will be securing investments with
global counterparties and providing treasury execution
Citi will facilitate the LME Clear
Secure Payment System on the new clearing platform, providing
concentration bank services and processing receipts from
members’ settlement banks.
JP Morgan will act as LME
Clear’s gold custodian, managing member gold
submitted as collateral to offset positions.
As the market awaited the confirmation of LME
Clear’s launch date, FOWi reported that
LCH.Clearnet was planning to triple the fees for the LME
members to clear trades, rising from 15p per contract from
According to reports, LCH.Clearnet increased the fees due to
rising capital demands on European clearinghouses.
The fees will apply to the likes of Jefferies, Deutsche Bank
Prior to the changes in fees LME produced its second
consecutive month of record volumes in May, edging past
April’s all-time activity high by just under
LME’s Q1 activity
remained steady as its year-to-date volumes remained on par
with 2012 but starting to rise in the past two months.
Its average daily volumes have risen 13%
year-on-year to 695,130.