LIFFE, the derivatives platform of exchange group NYSE Euronext, has revised its clearing agreement with LCH.Clearnet, enabling it to take full responsibility of its own clearing activities.
LIFFE has applied to become a self-clearing Recognised Investment Exchange and has targeted Q1 2009 to begin its new clearing structure, subject to regulatory approval.
Under the new agreement, LIFFE has terminated its existing clearing arrangements with LCH.Clearnet, making a one-off €260 million payment to the clearing house.
The creation of
LiffeClear will allow LIFFE to become a central counterparty to its own contracts. Clearing guarantee arrangements and related risk functions will be outsourced to LCH.Clearnet, which will remain responsible for defaulting member positions and default resolution.
NYSE Euronext also hopes to use LiffeClear as a gateway for direct investment into clearing technology and services, and for collaboration opportunities with NYSE Liffe, NYSE Euronext’s US futures affiliate.
“LiffeClear will enable competition against LIFFE’s vertically-integrated international peers on a more level playing field,” said Hugh Freedberg, group executive vice president and head of global derivatives at NYSE Euronext. “For LCH.Clearnet, it means no disruption to its default backing arrangements and reaffirms its long-term relationship with LIFFE.”