The London Metal Exchange, the world’s biggest metals marketplace, selected JPMorgan Chase & Co., Citigroup Inc. and Bank of America Merrill Lynch to provide services related to its clearing system.
JPMorgan will be the custodian for gold used by exchange members as collateral to back trades through its clearinghouse, the LME said today in an e-mailed statement. Citigroup will act as custodian for fixed-income collateral and “facilitate” LME Clear’s secure payment system, while Bank of America Merrill Lynch will provide treasury execution services.
Clearinghouses, which stand between buyers and sellers to reduce the risk of default, have become more valuable as regulators seek to increase central clearing of derivatives. The LME, which handled $14.5 trillion worth of contracts last year, is building its own system to replace LCH.Clearnet Group Ltd., the exchange’s current provider of clearing services.
Hong Kong Exchanges & Clearing Ltd., which bought the LME last year for 1.39 billion pounds ($2.1 billion), is helping to build the clearinghouse. LME Clear is set to go live in 2014, according to today’s statement. The London exchange lists contracts for industrial metals from aluminum to tin.