DTCC abandons LCH.Clearnet purchase
US post-trade utility Depository Trust & Clearing Corporation (DTCC) has announced that it will not go ahead with its planned purchase of LCH.Clearnet, the European clearing house, and will instead “seek other strategic alternatives".
DTCC originally announced its intention to buy LCH.Clearnet for EUR 739 million in October 2008. In December 2008, LCH.Clearnet terminated the exclusivity agreement to enable it enter talks with a third party, but DTCC continued to conduct the due diligence process on a non-exclusive basis. DTCC had intended to convert LCH.Clearnet from a for-profit to a user-owned and governed at-cost model within three years.
LCH.Clearnet clears for a range of European equity exchanges and platforms, including NYSE Euronext, the London Stock Exchange and NYSE Euronext’s SmartPool MTF. It also offers clearing for a number of other exchange-traded and over-the-counter (OTC) instruments, including derivatives, fixed income, swaps, commodities and energy.
Details of a rival bid by a consortium of brokers, many of whom are also user-members of DTCC, are expected before the end of May. ICAP, a UK-based inter-dealer broker, acknowledged its role in the consortium in March. Four of the reported consortium participants sit on the DTCC’s board of directors.
Brokers have become increasingly interested in the clearing space due to increased regulatory pressures on OTC markets to adopt more robust and transparent post-trade processes, thereby increasing clearing volumes.
DTCC said that it had “continually communicated” its desire to complete a successful merger to the management and the board of LCH.Clearnet, but added that the clearing house was unable to agree on a basis for finalising the merger.
“After consultation with our board of directors, regrettably DTCC sees no choice but to pursue other strategic alternatives to develop seamless transatlantic clearing services to support the needs of our customers and the industry,” the firm said.