The service offers London securities markets the full advantages of post-trade anonymity, further deepening the liquidity of the London equity markets for the benefit of all investors. Firms trading on SETS will be protected from the default of their market counterparties. The service will also offer firms the ability to net margins across derivatives and cash markets, improving the efficiency of settlement processing.
LCH, the London Stock Exchange and CRESTCo have co-operated closely to provide this service. Its successful introduction demonstrates once again London's ability to work with the financial community and reinforces London's pre-eminent position as an international equity market.
Combining the London Stock Exchange's role as the largest exchange in Europe with LCH's role as central counterparty and CREST's capabilities in high volume real-time processing has produced a world-class service.
In the first phase commencing today, LCH settles each trade with market participants on an 'as dealt' basis. A further phase of the service will see the introduction of optional netting, planned for early 2002. Netting will increase operational efficiencies and cost savings for users.
The CCP service is extremely cost effective; LCH members will be charged only £0.20 for each side of an equity trade submitted to the CCP, irrespective of the value of the transaction.
Clara Furse, Chief Executive of the London Stock Exchange said: "This central counterparty is good news for London and it is good news for our customers. It highlights how London-based organisations can work constructively to meet market needs, and in so doing, deliver world class services. By encouraging greater use of SETS, this service will lead to more effective price formation, to the benefit of the market as a whole."
David Hardy, Chief Executive of LCH, said: "The introduction of CCP for Equities demonstrates LCH's commitment and flexibility in delivering multi-user services which will provide ever greater business efficiencies and cost savings to its members."
Iain Saville, Chief Executive of CRESTCo, said: "We believe that the CCP model and tariff sets the standard in Europe for equity clearing. The infrastructure is flexible enough to take feeds from a variety of trading platforms."
LCH and CRESTCo intend to re-use the infrastructure for the Irish Stock Exchange and virt-x this year.
