Pan-European exchange Euronext has signed a clearing deal with the London Stock Exchange, putting water under the bridge between the two companies.
As part of the 10-year agreement, Euronext has terminated its derivatives clearing contract with the Intercontinental Exchange (Ice), which owns the New York Stock Exchange.
In addition to the agreement, Euronext has agreed to swap its current 2.3 per cent stake in the LSE’s LCH Group for an 11.1 per cent shareholding in its French clearing arm, LCH SA.
“This transaction will strengthen the long-standing relationship between Euronext and LCH SA, and cement the strategic future of LCH SA,” Euronext said.
The tie-up comes nearly six months after Euronext’s deal to buy LCH SA in its entirety broke down. The €510m (£460m) deal was dependent on the completion of the LSE’s failed merger with Deutsche Boerse.
Euronext chief executive Stephane Boujnah said today: “This agreement is a long-term and sustainable solution for the clearing of our derivative markets.
“It also provides Euronext with a sizeable ownership position in a leading multi-asset [clearing house] based in the Eurozone with strong positions in the fast growing fixed income and [credit default swap] businesses.
“Our clients will benefit from a reduction in clearing fees and the continuity of service avoids the cost and disruption associated with a migration.”
The agreement covers the clearing of financial derivatives and commodity derivatives for the next 10 years.
The groups said this would provide continuity and avoid the costs and disruption of migrating to a different platform “at a time where client bandwidth is stretched due to MiFID2 implementation and Brexit planning”.
Euronext and LCH SA will work together to develop new products for the benefit of clearing members and market participants, and to focus on providing a lower cost service for members.
They also plan to cut clearing fees to 15 per cent from January 2019, depending on each specific product and service, to help “improve the competitive landscape and encourage increased trading volumes”.