LSE to Proceed With Link Plan Delayed by Swiss-Franc Shock

  • London Stock Exchange to link to a third clearinghouse
  • CEO Rolet has championed open access for exchange operators

London Stock Exchange Group Plc will take a major step forward in its policy of giving more choice to customers when it starts a link with European Central Counterparty NV later this month after overcoming regulatory scrutiny in the aftermath of the extraordinary volatility in the Swiss franc.

EuroCCP will begin clearing trades from LSE’s cash equity market on Oct. 26, according to a notice sent to customers on Friday. Trades can now go to EuroCCP as well as the exchange operator’s existing clearinghouses, LCH.Clearnet Ltd., which is majority owned by LSE, and SIX x-clear AG.

Regulators forced the firms to postpone the link after a policy change by the Swiss National Bank triggered massive volatility in currency and stock markets earlier this year, according to a person familiar with the discussions who declined to be identified, citing confidentiality. Officials wanted to reassess the resilience of the link between the three clearing firms in the aftermath of January’s Swiss franc upheaval, the person said.

“After the postponement of LSE go-live in March, the three interoperating CCPs collaborated to strengthen risk management when there are sudden and large increases in inter-CCP exposures, whether the increase is predictable or not,” said Diana Chan, the chief executive officer of EuroCCP.

LSE CEO Xavier Rolet has championed a policy of giving customers greater choice in how their trades are handled. The approach is part of a philosophy, called open access, that would expose the company’s business -- from indexes to clearing -- to increased competition. He’s betting this will bring more customers to the exchange group than it will lose.

The EuroCCP project has been in the works for more than a year. EuroCCP announced in May 2014 that LSE customers would have access to Europe’s largest equities clearinghouse. Central counterparties, as they are known, stand between trading counterparties, giving them protection if one of the parties defaults.

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