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Euronext eyes clearing alternatives to LCH SA

15 February 2017

Exchange operator will pursue other alternatives if Clearnet deal falls through

Read more: exchange derivatives

Euronext chief executive Stephane Boujnah has said the exchange operator will keep its eyes peeled for other acquisitions if it does not succeed in acquiring the French clearing arm of the London Stock Exchange Group.

The European exchange group agreed to buy the Paris-based LCH Clearnet SA for €510 million ($538 million) in January to pave the way for the merger between Deutsche Boerse and the London Stock Exchange. 

Approval for the merger is pending with the European Commission, which recently delayed its decision deadline from March to April.

"If the merger is not completed, we will pursue other alternatives to offer the best clearing service to clients. Irrespective of Clearnet, we continue to screen for possible new acquisitions," said Stephane Boujnah, chairman and chief executive officer of Euronext.

Boujnah’s comments came during an investor call about Euronext’s full year results for 2016. The exchange operator reported a 4.3% decrease in revenue for the year to €496.4 million ($523.5 million).

Derivatives trading on the exchange’s platforms decreased by 9.8% in 2016 compared to 2015 to €40.1 million. According to Euronext, the decline was due to low volatility. 

Trading in index products also declined by 9.8% and trading in equity options decreased by 5.2% to 222,942 lots.

Consistent with the trend in derivatives trading, clearing revenue decreased by 7.6% to €48 million in 2016.

"2017 will be a critical year for our industry landscape. We will remain focused on executing our Agility for Growth strategy and maximising opportunities that may arise, as we did with the agreement to potentially acquire LCH.Clearnet SA," Boujnah said.

Last Monday, Euronext reported the average daily volume of its equity index derivatives contracts last month was also down 25.9% on January 2016. 

Trading in single stock derivatives fell 18.3% and the average in commodity derivatives trading was down a quarter on the same month last year.

Post-trade plans

Euronext also announced the launch of a new post-trade solution, Euronext Chequers, this week.

The system forms part of the stock market operator's 'Agility for Growth' blueprint and will  provide risk analytics, inventory management and a collateral transformation platform.

It will be rolled out in stages throughout  2017, supporting commodities, fixed income and equities.

"The new service meets increasing‎ participant demands for collateral upgrade opportunities   given regulatory constraints relating to capital and margin requirements,"  Lee  Hodgkinson, chief executive of Euronext London and head of markets and global sales, said in a statement. 

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