LSE-EuroCCP Link Delayed Following Swiss Franc Volatility

The London Stock Exchange (LSE) has been forced to delay a clearing link with EuroCCP due to concerns of ‘interoperability’, following market volatility caused by the unpegging of the Swiss Franc in January this year.
By Joe Parsons(2147488729)
The London Stock Exchange (LSE) has been forced to delay a clearing link with EuroCCP due to concerns of ‘interoperability’, following market volatility caused by the unpegging of the Swiss Franc in January this year.

The link, which was set to go live on March 23, would have seen EuroCCP becoming a clearing provider of the LSE’s two flagship electronic order book’s, whilst also connecting to LCH.Clearnet, which the LSE owns, and Zurich-based SIX X-Clear.

However, the dramatic rise in market volatility due to the unpegging of the Swiss Franc from the Euro has forced the LSE to put the go-live of the link on hold.

This is because during the time when the markets were spiking, the amount of inter-CCP margin between LCH.Clearnet and SIX X-Clear was significantly higher than normal. This has led to a review of inter-CCP margining procedures between the two clearing houses during times of extreme market volatility. Because EuroCCP is set to join the clearing link, it too has to review its procedures.

“Whilst the CCPs have made considerable progress with respect to this project, further time is needed to address risk considerations that need to be resolved between them and in consultation with their regulators,” the LSE states in a service announcement.

The three clearing houses are collaborating to model their potential exposures to each other, enabling greater interoperability and ensuring they can exchange intra-CCP margin during times of volatility.

The LSE has not stated when the EuroCCP link will go live.

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