The London Metal Exchange, the world’s largest metals marketplace, will move to its own clearing platform on Sept. 22, 2014, after 25 years with LCH.Clearnet Group Ltd., Europe’s biggest clearinghouse.
The LME and LCH.Clearnet agreed on a plan to make the switch, the two companies said in a joint statement today. The LME is building its own clearinghouse to boost revenue and introduce new products.
“LME Clear and LCH.Clearnet have worked together to plan a controlled, efficient migration of services to the LME’s new clearing service,” said Trevor Spanner, managing director of post trade services at LME Clear. “Ensuring continued market stability and minimizing disruption for members were driving principles behind our planning.”
Clearinghouses stand between buyers and sellers to reduce the risk of default and have become more valuable as regulators seek to increase central clearing of derivatives. 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. The LME handled $14.5 trillion of metals contracts from aluminum to tin last year.
LCH.Clearnet this month tripled a fee levied on LME contracts. The registration fee rose to 15 pence (23 U.S. cents) a contract from 5 pence as of June 1 for clearing members of the LME, London-based LCH.Clearnet said last month.