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An article relating to this blog post on Finextra:

LCH.Clearnet looks to deal with bidding consortium

LCH.Clearnet has responded to last week's EUR830 million offer from a consortium of banks and Icap by indicating its willingness to interweave elements of the bid with its own restructuring plans. Mea...


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What are they doing at LCH.Clearnet?

The banks consortium bid for LCH.Clearnet has not been a knockout according to the noises coming from the LCH.Clearnet board. Rather it has produced a rather strange response where the board would like to cherry pick parts of it and try to integrate them into their own plan. In my opinion, it is doubtful that this will result in bringing the ailing clearer into the 21st century.

Strange times often bring strange behaviour and this mix and match response from LCH.Clearnet indicates a certain detachment from reality. Where is the vision for the future and the understanding of the needs of a securities industry struggling to recover from the financial and economic crisis?

Leadership has to be more dynamic and more realistic to the market and industry position, with the needs of customers paramount by delivering better services at competitive prices. 

LCH.Clearnet has been bouncing around for years with it seems poor management unable to react to the changing needs of the industry where clearing is a fundamental component of its efficiency. The systems at LCH.Clearnet have been in need of modernisation for years and it's a loosely kept secret in the industry of their failure to produce and deliver successful system projects. We can only guess the reasons!

The bid by the DTCC would have provided the international securities market with an important consolidation tying together the USA and EU securities markets and with a vital link between NYSE Euronext and the London Stock Exchange. This would have been a significant improvement for all financial institutions including significantly those banks in the consortium.

The banking consortium if successful in its bid for LCH.Clearnet will drive a wedge in the industry between other financial institutions not part of the consortium. This could actually increase fragmentation in clearing thus increasing risk and costs overall to the securities industry. Hardly a great time to do that!

Clearing is a commodity business and should not be grabbed at as some profitable pastime by any commercial enterprise. Clearing works best when the sum of the parts are operating for the greater good of all and with this current situation LCH.Clearnet is obviously only looking after its own position rather than what is best for the industry. Let's hope the DTCC come back in and take over this business.      

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