Euronext (Paris:ENX) (Amsterdam:ENX) (Brussels:ENX), the leading
pan-European exchange in the Eurozone, announces it has signed binding
terms with LCH SA, LCH Group and London Stock Exchange Group for the
continued provision of clearing services for its derivatives products.
The agreement covers the clearing of financial derivatives and commodity
derivatives for a period of 10 years offering comparable financial
conditions. Euronext and LCH SA will work together to develop new
products for the benefit of clearing members and market participants.
Euronext will swap its current 2.3% stake in LCH Group for an 11.1%
stake in LCH SA, subject to regulatory approvals and other customary
conditions. LCH SA is a leading multi-asset CCP, based in the Eurozone,
with substantial growth opportunities in the fixed income and CDS
businesses. This transaction will strengthen the long-standing
relationship between Euronext and LCH SA, and cement the strategic
future of LCH SA.
Euronext will remain on the Board of LCH SA following completion of the
share swap. Euronext will also nominate one representative to LCH SA
Audit Committee and will continue to be represented at LCH SA Risk
Committee. A new Consultative Committee dedicated to Euronext
derivatives business will be created.
The new long-term agreement covers the clearing of financial derivatives
and commodity derivatives for a period of 10 years, providing continuity
of clearing services for members, and saving the cost and disruption
associated with a migration at a time where client bandwidth is
stretched due to MiFID2 implementation and Brexit planning. Euronext and
LCH SA will work together to develop new products for the benefit of
clearing members and market participants, and to focus on providing a
lower cost service for members.
Euronext and LCH SA will work together to achieve a targeted range of
reduction in clearing fees of 5% to 15% with effect from January 2019,
depending on each specific product and service. The precise quantum of
the reduction for allocation to each derivative product line will be
refined in consultation with market users. The targeted reduction in
frictional costs will further improve the competitive landscape and
encourage increased trading volumes.
The parties have agreed that Euronext will have certain minority
protection rights connected with its new shareholding in LCH SA.
Euronext will have a pre-emption right in circumstances where LCH Group
decides to sell more than 50% of the shares of LCH SA. The pre-emption
right involves a right of first offer and subject to certain conditions,
a matching right. In addition, LCH Group has a pre-emption right over a
transfer of shares by Euronext and the ability to buy back Euronext’s
shares in certain circumstances where the derivatives agreement is
In addition the agreement provides a comparable revenue sharing
mechanism delivering a continued clearing income stream for Euronext.
Euronext will also recognise at closing a net capital gain following the
share swap of around €24m.
Overall this represents a long term, sustainable continuity of clearing
services for Euronext and its clients. The formal clearing services
agreement is expected to be completed during Q4 2017.
Stéphane Boujnah, CEO and Chairman of the Managing Board, Euronext
N.V said: “This agreement is a long-term and sustainable solution for
the clearing of our derivative markets. It also provides Euronext with a
sizeable ownership position in a leading multi-asset CCP based in the
Eurozone with strong positions in the fast growing fixed income and CDS
businesses. Our clients will benefit from a reduction in clearing fees
and the continuity of service avoids the cost and disruption associated
with a migration.”
Euronext is the leading pan-European exchange in the Eurozone with
nearly 1,300 listed issuers worth close to €3.5 trillion in market
capitalisation as of end June 2017, an unmatched blue chip franchise
consisting of 24 issuers in the Morningstar® Eurozone 50 Index? and a
strong diverse domestic and international client base. Euronext operates
regulated and transparent equity and derivatives markets. Its total
product offering includes Equities, Exchange Traded Funds, Warrants &
Certificates, Bonds, Derivatives, Commodities and Indices. Euronext also
leverages its expertise in running markets by providing technology and
managed services to third parties. In addition to its main regulated
market, Euronext also operates Euronext GrowthTM (formerly known as
Alternext) and Euronext AccessTM (formerly known as the Free Market).
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LCH is a group of leading multi-asset clearing houses that provides
proven risk management capabilities across a range of asset classes. As
demand for robust clearing services continues to grow, LCH is committed
to maintaining the highest standards of risk management across all our
As the markets’ partner, LCH operates an open access model, offering a
choice of execution venues, delivering unprecedented choice and
efficiencies to the marketplace.
LCH operates clearing houses around the world, with clearing houses
incorporated in the UK, France and the United States with additional
offices in the Asia Pacific region. It offers clearing services across
asset classes including OTC and listed rates; CDS and FX; fixed income;
commodities; cash equities and equity derivatives.
LCH is majority owned by London Stock Exchange Group (LSE.L), an
international markets infrastructure business that sits at the heart of
the world’s financial community.
Further information on LCH can be found at www.lch.com
This press release is for information purposes only and is not a
recommendation to engage in investment activities. This press release is
provided “as is” without representation or warranty of any kind. While
all reasonable care has been taken to ensure the accuracy of the
content, Euronext does not guarantee its accuracy or completeness.
Euronext will not be held liable for any loss or damages of any nature
ensuing from using, trusting or acting on information provided. No
information set out or referred to in this publication may be regarded
as creating any right or obligation. The creation of rights and
obligations in respect of financial products that are traded on the
exchanges operated by Euronext’s subsidiaries shall depend solely on the
applicable rules of the market operator. All proprietary rights and
interest in or connected with this publication shall vest in Euronext.
This press release speaks only as of this date. Euronext refers to
Euronext N.V. and its affiliates. Information regarding trademarks and
intellectual property rights of Euronext is located at www.euronext.com/terms-use.
© 2017, Euronext N.V. – All rights reserved