The London Metal Exchange has announced proposals to consider building its own clearing house, jolting its current supplier LCH.Clearnet.
In a circular to members, the LME said a move to self-clearing would be accretive to earnings. "We have reached the point at which deeper examination of the issues requires some discussion in the public arena," the notice continued.
The announcement came as surprise to LCH.Clearnet, which currently conducts clearing operations for the Exchange.
In a statement, the London-based clearer noted its long relationship with the LME and market participants, adding: "LCH.Clearnet has not received notice from the LME or indeed any indication regarding the likely timeframe."
Ian Axe, chief executive of LCH.Clearnet says: "We value our relationship with the LME and shall continue to provide the LME and its members with an excellent service and the benefit of our unique experience in clearing for this complex market - we are a leader in commodities clearing globally. Market participants tell us they are looking for proven, efficient and consolidated clearing offerings. LCH.Clearnet is best placed to continue to deliver this."
The LME's move adds to the pressure on LCH.Clearnet, which is facing increasing competition from new entrants to the European markets and the loss of some of its biggest contracts. Nyse Euronext Liffe, for instance, announced plans to conduct self-clearing in May last year, and the London Stock Exchange is also believed to be considering its options.