By Simon Miller
NYSE Euronext is to invest $85m in central clearing operations following the failed merger between it and the Deutsche Bourse, and the takeover of LCH.Clearnet by the London Stock Exchange.
As a result it will terminate its current outsourcing arrangements for banking, guarantee and default management with LCH.Clearnet by mid-2013.
The "fully self-sufficient Recognised Clearing House (RCH)" is expected to be operational by the summer of 2013 with the clearing of all NYSE Liffe's London contracts transfered at that time.
The clearing of NYSE Euronext's derivatives business traded in Amsterdam, Brussles, Lisbon and Paris, which currently clears with LCH.Clearnet SA, in Paris will be transferred to the RCH early in Q1 of 2014.
NYSE Euronext CEO Duncan Niederauer commented: "Formalising these steps now and communicating them clearly to our customers will allow them to more effectively plan their capital allocation needs and will enhance their operational stability in a highly competitive and fluid environment."
The $85m investment over the next two years is expected to see 70% in the form of capital expenditure and NYSE Euronext estimates that this will bring annualised net cost savings of around $30m.
Niederauer continued: "Our clients have long asked for a consolidation fo clearing arrangements and the strength of our European derivatives business allows us to deliver meaningful benefits for them in the form of capital efficiencies and savings."
The trading of continental derivatives will continue to be executed on NYSE Euronext markets in Amsterdam, Brussels, Lisbon and Paris while the exchange expects to renegotiate a long-term arrangement with LCH.Clearnet SA over the clearing of its regulated cash markets.