The London Stock Exchange has unveiled plans to introduce a post-trade router that will facilitate competition between clearing services.
At least four Central Counterparties (CCPs) are expected to enter the UK market in addition to LCH Clearnet Ltd, the existing sole supplier of clearing, and the X-TRM router will support competition between them by eliminating the need to carry out reconciliation work between the CCPs on a bilateral basis.
In addition, the router will provide exchange-level netting services to trading members of the London Stock Exchange, giving users a much more cost-effective way to net their SETS transactions for settlement purposes.
“The EU’s Code of Conduct on Clearing and Settlement introduced by Commissioner McCreevy envisages a competitive and inter-operable post-trade environment. This is already starting to take shape in our markets where the move towards competition has reduced clearing fees by up to 75% for our largest customers, and there are now plans for at least five interoperable CCPs. The X-TRM router will provide a simple mechanism to route trades to them, streamlining a huge amount of expensive and time-consuming reconciliation work at a stroke.
“The ability of the X-TRM router to provide exchange-level post-trade netting services is an additional boon. This enables us to provide a service that we expect will bring users a saving in their post trade costs of around 35%, equating to an annual saving of at least 25 million,” says Nic Stuchfield, director of post-trade strategy, London Stock Exchange.