Market clearing

22 October 2008 By Mike Prest

The merger of LCH.Clearnet and DTCC will create the world s biggest clearing and settlement operation. That will be tough for competitors but good for users. The new giant should exploit the trend to clear more offexchange trades making global finance a bit safer.

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LCH.Clearnet, Europe's biggest clearing and settlement organisation, and The Depository Trust & Clearing Corporation, its US counterpart, announced on October 22 that they have agreed to combine.

DTCC will pay a total consideration of E10 a share for all of LCH.Clearnet's stock, valuing the deal at about E739m. The new business will be userowned and usergoverned. It intends after three years to move to providing all its services at cost.

DTCC's European subsidiary, EuroCCP, which is based in France, will join the merged business to form a single European clearing business.

The new business will have between 500 and 600 members and clear trades for several thousand users.

Eurex, the Deutsche Börse's derivatives exchange, said on October 22 that it wants expand into clearing CDSs. It said it was open to create a consortium with CDS users to share governance and control of the CDS services.

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