Under its “Agility for Growth” strategy, Euronext has deployed significant effort to establish clearing optionality for its clients, including acquiring a 20% stake in EuroCCP and subsequently launching the preferred clearing model for cash equities.
On 3 January 2017, Euronext announced that it had been granted exclusivity to acquire 100% of the share capital and voting rights of LCH.Clearnet SA (“Clearnet”), contingent on the closing of the merger between Deutsche Börse AG and LSE Group. Euronext has communicated to the management and the Board of Directors of both LSE Group and LCH Group that the transaction remains a strategic priority of Euronext and that Euronext will remain a willing buyer of Clearnet, irrespective of the outcome of the merger between LSEG and DBAG, under the terms agreed.
Considering the European Commission’s prohibition of the merger between Deutsche Börse AG and LSE Group and the refusal of LSE Group and LCH Group to engage in discussions about completing the agreed sale of Clearnet, Euronext is now obliged to ensure its clients obtain the best, most cost effective and competitive clearing solutions beyond 31st December 2018, at which time the current clearing services agreement with Clearnet will expire.
The agreement with ICE Clear Netherlands covers the clearing of financial derivatives and commodity derivatives for a period of 10 years with ICE Clear Netherlands. Euronext will contribute a €10m upfront investment in ICE Clear Netherlands. Clearing operations will be run from Amsterdam and a new and innovative solution for asset financing, inventory management and physical delivery for commodities will be built by Euronext and operated from Paris.
The parties intend to significantly reduce explicit and implicit costs for customers, through a 15% reduction in headline clearing fees, lower treasury management fees and the delivery of strong capital efficiencies.
In addition the agreement provides for a continued income stream for Euronext, with EBITDA levels that should be comparable to FY2016.
Overall this represents a long term, open access, sustainable and innovative Eurozone based clearing proposition for Euronext and its customers.
Euronext will appoint one representative to ICE Clear Netherlands risk committee and will chair a product committee dedicated to Euronext‘s clearing service.
The formal clearing services agreement is expected to be completed during Q2 2017.
In respect of its cash equity markets, Euronext has launched a Preferred Clearing service, providing trading participants with the choice of CCP of Clearnet and EuroCCP, in which it owns a 20% equity stake. This model will be followed by a fully interoperable service and will be open to other CCPs in due course.
In order to ensure a seamless migration of Euronext derivative markets to the new clearing house during H2 2018, Euronext and ICE Clear Netherlands will immediately engage in a joint client consultation.
Stéphane Boujnah, CEO and Chairman of the Managing Board, Euronext N.V said: “Despite the prohibition of the merger between Deutsche Börse AG and LSE Group by the EU Commission, Euronext has reaffirmed to both LSE and LCH Group its willingness to proceed with the acquisition of Clearnet for €510m, and Euronext continues to remain a willing buyer of Clearnet. But in the absence of obtaining an agreement to complete this acquisition, Euronext is fully committed to securing the best long-term solution for its post-trade activities, in the interests of clients and shareholders. I am therefore pleased to be signing heads of terms with ICE, who are renowned for their world-class clearing services, to deploy joint clearing services to Euronext markets from Amsterdam and Paris.”
