The London Stock Exchange (LSE) today announced plans to introduce a post-trade order router, called X-TRM, that will facilitate competition between clearing services. At least four Central Counterparties (CCPs) are expected to enter the UK market in addition to LCH Clearnet, the existing sole supplier of clearing, and X-TRM is designed to support competition between them by eliminating the need to carry out reconciliation work between the CCPs on a bilateral basis.
In addition, the router will provide exchange-level netting services to trading members of the LSE, giving users a more cost-effective way to net their transactions on SETS, the LSE's electronic order book, for settlement purposes, according to the exchange.
Nic Stuchfield, Director of Post-Trade Strategy, comments: “The EU’s Code of Conduct on Clearing and Settlement introduced by Commissioner McCreevy envisages a competitive and inter-operable post-trade environment. This is already starting to take shape in our markets where the move towards competition has reduced clearing fees by up to 75 per cent for our largest customers, and there are now plans for at least five interoperable CCPs. The X-TRM router will provide a simple mechanism to route trades to them, streamlining a huge amount of expensive and time-consuming reconciliation work at a stroke.
“The ability of the X-TRM router to provide exchange-level post-trade netting services is an additional boon. This enables us to provide a service that we expect will bring users a saving in their post-trade costs of around 35 per cent, equating to an annual saving of at least L25 million," continues Stuchfield.
X-TRM is operated by Monte Titoli, and provides post-trade routing, competitive clearing and settlement netting in a number of Italian markets. As such it forms the backbone of the Italian post-trade environment which has been recognised by the European Commission as the most efficient in Europe. X-TRM has a track-record of providing routing and netting services to competing trading platforms through its relationships with, among others, MTS and BrokerTEC. The exchange plans to introduce the router into the UK market later this year.