Trading Technology

08:51 AM
Connect Directly
Facebook
Google+
LinkedIn
Twitter
RSS
E-Mail
50%
50%

DTCC and LCH.Clearnet Move to Create World’s Largest Clearing House

Combined company would cover equities, fixed income, mutual funds, annuities, OTC products and more.

The Depository Trust & Clearing Corporation (DTCC) and LCH.Clearnet Group (LCH.Clearnet) have signed an agreement to merge the two companies. The merged company would create the world's largest clearing house, which would operate a user-owned, user-governed model, with LCH.Clearnet moving to an at-cost based structure comparable to DTCC's within three years.

It is anticipated that the proposed merger will result in significant synergies and efficiency gains, largely derived from technology savings, as well as significantly enhanced economies of scale. In addition, for the first time both the U.S. and Europe would be supported by a common infrastructure. As a result, the new company expects further reductions in the costs of LCH.Clearnet's and DTCC's services, most notably for equities in both Europe and America.

The combined group would focus on maximising value to users while ensuring the highest standards of risk management, according to a press release. The new company would cover such asset classes as equities, fixed income instruments, exchange-traded derivatives and commodities, mutual funds, annuities and OTC products such as interest rate swaps, credit default swaps, carbon emissions and freight contracts.

As a result of the transaction, LCH.Clearnet shareholders would receive total consideration of up to 739 million (10 a share), the majority of which would be funded through LCH.Clearnet's revenue.

Euroclear, currently the largest shareholder in LCH.Clearnet, with a holding of 15.8%, intends to support the transaction in principle and remain a shareholder of LCH.Clearnet HoldCo, and to thereby cement a strong partnership in European post-trade solutions.

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio

Comment  | 
Print  | 
More Insights
Register for Wall Street & Technology Newsletters
White Papers
Current Issue
Wall Street & Technology - Elite 8, October 2014
The in-depth profiles of this year's Elite 8 honorees focus on leadership, talent recruitment, big data, analytics, mobile, and more.
Video
Exclusive: Inside the GETCO Execution Services Trading Floor
Exclusive: Inside the GETCO Execution Services Trading Floor
Advanced Trading takes you on an exclusive tour of the New York trading floor of GETCO Execution Services, the solutions arm of GETCO.