Clearing house LCH.Clearnet plans to introduce free equity clearing for members that clear more than 150,000 trades a day on average. The new tariff is part of a restructuring of the central counterparty's equity clearing tariff, due to be implemented on 1 October 2010, and will give members clearing more than a daily average of 50,000 trades a marginal cost of 1p per trade up to 75,000 trades, after which the marginal cost will fall to 0.5p.
It follows cuts made by LCH.Clearnet to its net trading tariff on 22 February 2010 and to its trading fees on 1 June 2009. The latter did not prove attractive enough for exchange group NYSE Euronext, which announced its intention to develop its own clearing system on 12 May 2010 citing changes in market structure for the decision.
NYSE Euronext accounted for around 43.5% of the clearer's equity clearing revenues in 2009 and following its departure rating agency Standard and Poors gave LCH.Clearnet a ”Creditwatch negative' status on 14 May 2010.
The London Stock Exchange (LSE) has since put its relationship with the clearer on review .
Commenting on the latest tariff changes, Kevin Milne, director of post trade at LSE, said, “We are very supportive of these amendments. In combination with our own ongoing tariff cuts, this move will further reduce the overall cost of trading for our major clients and make the service more compelling.
We will continue to work collaboratively with LCH.Clearnet and others to ensure that the users of our markets receive the most competitive offerings possible.” ”¨”¨
Wayne Eagle, director of equities at LCH.Clearnet, added, “This supports our exchange clients, rewards customer loyalty and incentivises growth. Customers get economies of scale, without having to choose between cost and the quality of clearing.”
Reducing the cost of post-trade clearing and settlement has been seen as the next cost hurdle for European equity markets which saw the trading fees charged by venues fall following MiFID's introduction on 1 November 2007. Pan-European central counterparties, including LCH.Clearnet, have reached an agreement which should allow them to interoperate creating competition, which could drive down clearing fees.
In a separate move the clearing house has put together a document, which it submitted to UK regulator the Financial Services Authority in August, lobbying in support of interoperability. Regulators temporarily delayed the interoperability process on 12 February 2010 by asking that counterparties' collateral arrangements be expanded.