The London Stock Exchange Group reported record volumes of over-the-counter clearing across all its services despite the UK leaving the European Union and increased competition.
The group said OTC volumes at clearing arm LCH hit all-time highs across SwapClear, CDSClear, ForexClear and RepoClear in 2019.
David Schwimmer, CEO, @LSEGplc: “It was another strong year for London Stock Exchange Group.” https://t.co/lBzjAwvmGy pic.twitter.com/2Aes7mHiRl
— LSEG (London Stock Exchange Group) (@LSEGplc) February 28, 2020
LCH’s OTC revenues grew 15% last year which the exchange said was driven by record SwapClear volumes.
David Schwimmer, chief executive of LSEG, said in a results call this morning that there had been no discernible change in customer behaviour at LCH despite Brexit. Notional cleared volume at SwapClear last year grew 14% to more than $1.2 quadrillion and the number of client trades cleared rose 13% to 1.7 million.
“We continue to see great member and client volumes at LCH, with growth in EU-domiciled customers in clearing,” Schwimmer said.
He added that SwapClear is recognised as a global liquidity pool with clearing in 26 currencies.
Deutsche Börse Group has been competing on clearing euro swaps through Eurex Clearing.
Matthias Graulich, Eurex Clearing board member, said in a blog that the alternative EU-based liquidity pool for Euro swaps continued to grow last year.
“I am therefore optimistic that – whatever political developments we see in the coming months – we will continue to competitively facilitate euro clearing in Frankfurt,” wrote Graulich.
All about #EuroClearing: get a review of 2019 and take a look into the future in the latest blog by #EurexClearing board member Matthias Graulich. https://t.co/xhaYQ997yM pic.twitter.com/2WNQcXlapt
— Eurex (@EurexGroup) January 20, 2020
He said there are more than 300 clients onboarded, with 170 joining last year.
“As you may have seen reported in November, Dekabank switched a substantial portion of their swap book from LCH to Eurex,” added Graulich. “Switching 7,000 trades in just a few hours clearly demonstrates that these types of moves are technically feasible and, obviously, economically viable.”
Graulich continued that at the end of last year, total notional outstanding of almost €13 trillion kept overall market share at nearly 15%.
Schwimmer said: “SwapClear had volumes in the quadrillions while others may clear a modest amount in the billions and only in euros.”
The chief executive also noted there are growth opportunities for SwapAgent, which processes trades in the OTC bilateral rates and foreign exchange markets, as the next phase of the uncleared margin regulations go live in September this year.
“SwapAgent has surpassed $1 trillion in total notional registered since launch,” Schwimmer added.
@LSEGplc announces 2019 preliminary results: strong financial performance. https://t.co/lBzjAwvmGy pic.twitter.com/8jiQJj812r
— LSEG (London Stock Exchange Group) (@LSEGplc) February 28, 2020
LCH forms part of the group’s new Post Trade division alongside CC&G and Monte Titoli, the Italian clearinghouse and central securities depository respectively; and UnaVista, which provides reporting services.
“The new division deliver greater customer benefits through collaboration and coordination on an open access basis,” added Schwimmer.
Equivalence
The European Commission has granted temporary equivalence to UK clearers so they can continue to take trades from EU-based market participants. However, LCH could lose its EU authorisation once the Brexit transition period comes to an end at the end of this year
Schwimmer said LCH has formally applied to become an authorised third-party clearer in the European Union.
“We expect a decision in the summer,” he added. “If there is a delay in the timing we expect the temporary equivalence to be extended as there is clear understanding in a number of jurisdictions around the world that LCH is systemically important.”
Refinitiv acquisition
Schwimmer continued that the acquisition of Refinitiv will accelerate the group’s growth strategy of becoming a leading global financial markets infrastructure provider; increase its global footprint; and add data, analytics and multi-asset class capital markets capabilities.
“Detailed integration planning is underway across 18 workstreams to ensure we are ready to deliver the benefits of the transaction,” he added. “We remain on track to close the transaction in the second half of this year.”
He continued that the group is actively engaging with EU competition authorities who are reviewing the deal. “There are no surprises,” Schwimmer added.
