The London Stock Exchange, London Clearing House (LCH) and CrestCo have embarked on the second phase of their central counterparty service, with the launch of a new facility for netting trades.
The new facility delivers optional settlement netting for trades executed through the London Stock Exchange's electronic order book (Sets), cleared through the LCH EquityClear service, and settled in Crest.
For the first time, traders will be able simply to enter an order to Sets and then trade execution, routing to clearing, including netting, and settlement can occur automatically without further intervention.
The successful introduction of the CCP service in February 2001 has been an important factor in the near doubling of trade volumes through Sets. It is anticipated that settlement netting will bring further volume growth and deeper liquidity, as well as reduce back office costs.
At the start of the service, some 60 per cent of Sets market volume will be netted. This is expected to rise to 95 per cent by the end of the year.
Clara Furse, chief executive of the London Stock Exchange, states: “The introduction of settlement netting of trades is a significant step forward for the London market. It underlines our commitment to reducing the unit cost of trading and reinforces London's pre-eminent position as an international equity market. This makes it very clear that a horizontal market infrastructure works in the best interests of our customers.”