LCH.Clearnet slumps to a loss after cutting transaction fees

LCH.Clearnet, Europe’s largest independent central clearer, has recorded a net loss of €91m (£79.4m) for 2009 caused by fee cuts and a fall in exchange trading volumes.

It is Clearnet’s first loss since it formed from a merger of the London Clearing House and Clearnet SA in 2003 and follows a €220m net profit in 2008.

Increased competition, including the opening of new trading venues, forced the group to drop its trading and clearing fees.

“The ongoing focus from regulatory authorities on clearing is creating both opportunities and challenges for our business across the financial markets,” said Roger Liddell, LCH. Clearnet’s chief executive. “In cash equities we have responded to an increase in competition by reducing our fees, most notably in LCH.Clearnet SA .”

Due to the impact of tariff reductions on future earnings, the group announced an impairment charge of €393.4m. Add in a tax bill of €121.4m, and the operating profit of €423m became a net loss, according to LCH Clearnet.

The total number of transactions cleared dropped 20 per cent, to 1.6bn.