London Stock Exchange, CRESTCo And London Clearing House Announce Central Counterparty To Bring Benefits For Equity Market Users

The London Stock Exchange, CRESTCo and London Clearing House (LCH) today confirmed plans to introduce a central counterparty service for the Exchange's electronic order book in the first quarter of 2001. The central counterparty service, which will be operated by LCH, will offer significant benefits to the London securities markets by introducing post trade anonymity and enhanced risk management for trades executed on the order book. In the first phase, the central counterparty will settle each trade with market participants on an 'as dealt' basis. It will be capable of clearing and settling the expanding volumes on the UK securities markets. The second phase of the programme will introduce optional settlement netting, increasing operational efficiencies and cost savings for users. A market-wide consultation on proposals for the move to netting is planned for the second quarter of this year. The platform's flexible design will allow it to be extended to other equity markets in the future. Iain Saville, chief executive of CRESTCo, said: "Today's announcement is a significant step forward. Bringing together the expertise and infrastructure of the UK's dominant providers of trading, clearing and settlement services will deliver a world-leading structure for the UK securities markets." David Hardy, chief executive of LCH, said: "The proposed model responds to the market's current needs, and the two-phase approach toward net settlement ensures smooth implementation for users and providers of the service. Building on LCH and CRESTCo's existing infrastructure will allow fast delivery of the high-volume, resilient operation London's market users demand." Martin Wheatley, director of Business Development at the Exchange, said: "This initiative demonstrates London's ability to deliver practical solutions which are scalable to meet the strategic needs not just of the UK market, but for Europe as a whole. When implemented, the central counterparty will represent a major step in the evolution of London's electronic markets."