UPDATE: Frustrated DTCC outlines post-LCH European strategy

Having walked out on merger talks with European clearing house LCH.Clearnet, US post-trade utility DTCC is focusing on developing its existing business in Europe, including pan-European clearing facility EuroCCP and its Deriv/SERV matching and confirmation service.
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Having walked out on merger talks with European clearing house LCH.Clearnet, US post-trade utility DTCC is focusing on developing its existing business in Europe, including pan-European clearing facility EuroCCP and its Deriv/SERV matching and confirmation service.

“We intend to compete aggressively in Europe for equity clearing with EuroCCP,” DTCC spokesman Stuart Goldstein told theTRADEnews.com. Following EuroCCP’s launch last September, it now clears for three pan-European multilateral trading facilities (MTFs) – Turquoise, SmartPool and NYSE Arca Europe. “We will announce another two platforms as clients in the coming months and have been approached by others to extend interoperability so they can gain access to EuroCCP,” he said.

DTCC is also active in Europe via Deriv/SERV, which provides matching and confirmation for credit default swaps (CDS), equity derivatives and interest rate derivatives. A significant portion of the world’s CDS trades emanate from London. “We’re already serving the European marketplace,” said Goldstein. “It is a question of now continuing to grow the presence we have on the ground.”

He added that DTCC’s growth in Europe could either be organic or through acquisitions or partnerships. “You can still accomplish some of this through organic growth, and there may still be other strategic opportunities and combinations that would help expedite it,” Goldstein said. “We would not preclude either.”

DTCC walked away from merger talks with LCH yesterday after months of negotiations and due diligence. The firms announced their intention to merge on 22 October last year and had originally intended to finalise the deal on March 15. This was later pushed back to the end of March.

“The process has dragged on to an extent that after consulting with our board, the decision was reached that it was time to move on,” said Goldstein.

The merger plans have been frustrated by a variety of events. In early February, it emerged that a consortium of brokers was considering a counter-bid for LCH.Clearnet. The consortium, which includes inter-dealer broker ICAP, has yet to table its bid, but news reports suggest the brokers will show its hand at the end of May. Later in the month, rumours emerged that French banks were plotting a eurozone super-clearer, which envisioned the splitting up of LCH.Clearnet and merging the European arm with Deutsche Börse’s Eurex Clearing central counterparty facility.

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