NYSE Euronext announces that its derivatives subsidiary, LIFFE Administration & Management takeы full responsibility for clearing activities in its London market, subject to regulatory approval, with the target of beginning operations in the first quarter of 2009.
LIFFE will become a self-clearing Recognised Investment Exchange and will fulfill certain clearing functions to LCH.Clearnet Ltd. LIFFE has entered into binding agreements with LCH.Clearnet to terminate its current clearing arrangements and to establish the new arrangements, known as “LiffeClear”.
To accomplish current clearing arrangements with LCH.Clearnet, NYSE Euronext will make a one-time 260 million payment to LCH.Clearnet.
According to LiffeClear arrangements, LIFFE will become central counterparty to its own contracts. The clearing guarantee arrangements and related risk functions will be outsourced to LCH.Clearnet, which will remain responsible for defaulting member positions, applying LCH.Clearnet regulation and resources to the resolution of such a default.
Clearing members will benefit from the investments LIFFE will be making in its post-trade services without losing the fundamental backing of LCH.Clearnet.
NYSE Euronext will be able to enter the clearing business through LIFFE. In addition, control over its clearing operations will position LIFFE to collaborate closely with NYSE Liffe, the new NYSE Euronext U.S. futures affiliate.
LiffeClear creates a new clearing solution that better suits LIFFE in today’s market environment, says Hugh Freedberg, group executive vice president and head of Global Derivatives, NYSE Euronext. For NYSE Euronext,LiffeClear will enable competition against LIFFE’s vertically-integrated international peers on a more level playing field. For LCH.Clearnet, it means no disruption to its default backing arrangements and reaffirms its long-term relationship with LIFFE. Together, NYSE Euronext and LCH.Clearnet have created new, efficient and cost effective clearing arrangements that will benefit members and provide a strong basis for future innovation.
L.D.