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Leslie Kramer
Leslie Kramer
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DTCC and LCH.Clearnet to Merge

The Depository Trust & Clearing Corporation (DTCC) and LCH.Clearnet Group have signed non-binding heads of terms regarding the proposed merger of the two companies. The merger proposal aims to create the world’s leading 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. 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. 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, we expect 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 whilst ensuring the highest standards of risk management. Its clearing and depository infrastructure would be underpinned by a significant breadth of financial expertise, proven risk management capabilities, volume capacity and market-leading technology solutions.The range of markets and services covered would be broad and diverse and would include 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. Clients served globally would include several thousand broker/dealers, banks, institutional investors, hedge funds, trust companies, mutual funds and insurance carriers and other third parties who market financial products.

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