LCH.Clearnet Group Limited has signed non-binding heads of agreement with International Derivatives Clearing Group, LLC (IDCG) and The NASDAQ OMX Group, Inc (NASDAQ OMX) regarding the acquisition of IDCG.
The transaction would represent the latest move by LCH.Clearnet Group to further enhance the range and flexibility of its clearing solutions and would facilitate its recently announced US cross-margining initiative.
LCH.Clearnet Limited (LCH.Clearnet) already operates interest rate swap clearing in the US through its market-leading SwapClear service. The acquisition of IDCG would be further testament to LCH.Clearnet’s commitment to the US marketplace and its aim of providing buy-side participants with more choice.
The acquisition of IDCG remains subject to negotiations and certain conditions including entering into a definitive agreement and there can be no certainty that the transaction will proceed. It is envisaged that if the transaction proceeds LCH.Clearnet Group would become the sole owner of IDCG and NASDAQ OMX would become a shareholder of LCH.Clearnet Group.
The acquisition of IDCG would be a natural expansion of LCH.Clearnet’s horizontal clearing model and further evidence of its commitment to the SwapClear service joining the existing “one-pot” cross-margining arrangement between New York Portfolio Clearing LLC, The Depository Trust & Clearing Corporation and NYSE Euronext. To date, the SwapClear service has cleared a total client notional of more than USD686 billion.
“LCH.Clearnet Group is committed to providing end-users with a broad range of clearing services for their over-the-counter trades. This strategic acquisition would complement our US offering, where we are seeing accelerating client take-up for the SwapClear service,” says Michael Davie (pictured), Chief Executive of SwapClear.
“This is an exciting, strategic opportunity which would extend the choice in our SwapClear client offering. It is further evidence of our commitment to the US market and would provide us with additional opportunities to grow in the future,” says Ian Axe, Chief Executive of LCH.Clearnet Group.
“NASDAQ OMX is an innovator and an early adopter of changes in market structure, including areas like OTC derivatives clearing,” says Eric Noll, Executive Vice President of Transaction Services US and UK at NASDAQ OMX. “As a future shareholder and a supporter of horizontal clearing models for our global marketplace, we are pleased to begin our strategic relationship with LCH.Clearnet on both sides of the Atlantic.”