Euronext has agreed a deal to acquire an 11% stake in the French operations of LCH Group on the back of a ten-year derivatives processing arrangement.
The pan-European exchange had been threatening to move its clearing business to ICE Clear Europe following the termination of the proposed merger between Deutsche Bourse and the London Stock Exchange and the collapse of its agreement to acquire LCH's French operations.
Under the new agreement, Euronext will swap its current 2.3% stake in LCH Group for an 11.1% stake in LCH SA, subject to regulatory approvals. The London Stock Exchange will see its stake in LCH rise to 59%, while Euronext will recognise at closing a net capital gain following the share swap of around €24m.
The exchange operator says the ten-year clearing programme will provide continuity of clearing services for members, saving the cost and disruption associated with a migration at a time where client bandwidth is stretched due to MiFID2 implementation and Brexit planning.
Euronext and LCH SA say they will also work together to achieve a targeted range of reduction in clearing fees of 5% to 15% with effect from January 2019, depending on each specific product and service.
Stéphane Boujnah, CEO and chairman of the managing board, Euronext says: “This agreement is a long-term and sustainable solution for the clearing of our derivative markets. It also provides Euronext with a sizeable ownership position in a leading multi-asset CCP based in the Eurozone with strong positions in the fast growing fixed income and CDS businesses. Our clients will benefit from a reduction in clearing fees and the continuity of service avoids the cost and disruption associated with a migration.”