Roger Liddell, CEO of LCH.Clearnet, will step down in July 2011, after leading the clearing house for five years. The announcement comes four months after Jacques Aigrain, former CEO of insurer Swiss Re, was appointed chairman, replacing Chris Tucker.
Liddell has overseen a volatile period for LCH.Clearnet. A Goldman Sachs veteran, Liddell was promoted to the top spot in 2006, six months after his predecessor David Hardy resigned over a botched IT consolidation project between the London Clearing House and Clearnet, costing 67.9 million.
During his tenure, Liddell has seen a number of attempted takeovers come and go. In October 2008, the Depository Trust & Clearing Corporation announced that it had signed a non-binding agreement regarding a proposed merger of the two companies for 739 million.
Months later, the London Stock Exchange and ICAP emerged at the head of a rival consortium, only for LSE to later pull out of the deal. In May 2009, the DTCC abandoned its merger attempt, and in October 2009 ICAP also conceded defeat; the same month LCH.Clearnet shareholders agreed to buy back up to 45% of its shares and begin financial restructuring.
In 2010, major clients have moved away from the clearer. In May 2010 NYSE Euronext announced it will launch two new clearing houses in London and Paris by late 2012, severing its existing clearing arrangement with LCH.Clearnet. The exchange previously used LCH.Clearnet for clearing services, and since Q1 2009 outsourced its banking, guarantee and default management arrangements.
Weeks later, Xavier Rolet, the LSE CEO, announced that he was reviewing his firms relationship with LCH.Clearnet, noting that Standard & Poors had placed the clearing house on credit-watch.
Times have been hard for clearing houses as they attempt to remain competitive. Many exchanges, such as NYSE Euronext, are looking to set up in-house clearing houses in order to gain more revenue and decrease fees. LCH.Clearnet suffered a 91 million loss in 2009, down 310 million year-on-year. The main cause of the loss was due to an impairment charge of 393.4 million. According Liddell: “In cash equities we have responded to an increase in competition by reducing our fees, most notably in LCH.Clearnet SA where the clearing fee for blue chip stocks is now 0.05. Due to the impact of these tariff reductions on future revenues, we have recognised an impairment charge of 393.4 million.”
But there have been some success stories for LCH.Clearnet. The drive for transparency in the derivatives market has led to a significant increase in the value of contracts cleared in LCH.Clearnet’s OTC interest rate swap and fixed income businesses. In Q2 2010, the total number of trades in SwapClear reached 191,694 trade sides, a 30% increase on Q2 2009, bringing the outstanding amount of IRS transactions to $224.6 trillion. The nominal value of European government bond and repo trades cleared by LCH.Clearnet reached an all-time record of 35 trillion in Q2 2010.
LCH.Clearnet has also launched a clearing service for credit default swaps in Paris, working with BNP Paribas, Societe General, Credit Agricole and Natixis. Full scale clearing in CDS and FX derivatives is expected to launch in 2011.
The clearing house has also diversified its business, clearing the OTC wholesale London gold market in a joint initiative with the London Metal Exchange, and becoming the first to clear container freight derivatives
A former coal mine engineer with British Coal before joining Citibank in 1989, Liddell joined Goldman Sachs becoming managing director in 1998 and head of Global Operations in 2000. A director of Euroclear from 2000 to 2005, he joined LCH.Clearnet as non-executive director.
Aigrain said: Roger has turned the business around and has created a clearing house for the future. The company is now well positioned to benefit from the anticipated growth in OTC clearing and to leverage its position as a global leader.
Aigrain will now undertake the search for the new CEO, along with the Board and Nomination Committee.