European clearinghouse LCH.Clearnet confirmed market talk that it wants to enter the market and service alternative trading platforms.
The confirmation comes a day after Chi-X said that it signed a five-year deal deal to clear and settle its trades in ASX-listed securities through ASX. Because LCH.Clearnet would have needed to win a license from the government, Chi-X had little option but to choose ASX’s service. The agreement with ASX allowed Chi-X to enter Australia this year.
At the time of the signing, Peter Fowler, chief operating officer for Chi-X Australia indicated that the deal with ASX was non-exclusive and would not prevent his firm from changing to another clearing provider if the opportunity emerged. Chii-X Australia would still have to use ASX’s service for settlement
"In the clearing space, we have long advocated that facilitating the entry of competition will deliver greater innovation, better service and lower fees for market participants. We would welcome new clearing facilities to the Australian marketplace," Fowler said.
The deal with ASX requires, Chi-X was required to pay A$1,250,000 for a one-year licence or A$1,375,000 for a five-year licence. The pricing structure made it pragmatic for Chi-X to sign a five-year deal, with the additional four years effectively costing Chi-X just A$31,250 per year. The ASX said that the pricing reflected the high up-front costs for the ASX in changing its systems to give third parties access to its clearing and settlement infrastructure. The exchange said that it would offer a rebate if more than three market operators signed up to use ASX Clear, which would effectively divide the cost between them.
LCH.Clearnet has also applied for a license in Australia to clear trades remotely for the Financial and Energy Exchange, a small market for exchange-traded derivatives seeking regulatory approval. However, all of the clearing would still be based in London would technically give LCH.Clearnet access to the Australian market, all of its clearing infrastructure would still be based in London.