All Euronext securities transactions begin with a trade through a European exchange on either the electronic order book, a multilateral trading facility (MTF), or in the OTC (over-the-counter) markets.
Clearing is performed by a central counterparty (CCP) that guarantees both sides of the trade, thereby mitigating counterparty risk. The CCP acts as a buyer to every seller and a seller to every buyer in a transaction, stepping in to complete a trade if one party defaults – a process called novation.
The CCP nets all the gross trades in a given security to generate a single net settlement instruction. Settlement, the final link in the change-of-ownership process, occurs at a central securities depository (CSD) through the DVP (Delivery-versus-Payment) process.
Our current arrangement with LCH.Clearnet Group and the world’s leading cross-border settlement services provider Euroclear ensures that trades are processed efficiently and cost-effectively.
Alternext offers investors a safe environment thanks to the central counterpart system provided by clearing house LCH Clearnet. This entails significant risk control measures such as daily updating of positions, margin calls and clearing funds, ensuring maximum guarantees of trading payment and delivery for users.
To ensure an efficient, pan-European, low-cost solution, clearing and settlement on NYSE Arca Europe is managed by EuroCCP. Based in London and regulated by the Financial Services Authority (FSA), EuroCCP has a well-known, proven track record in Europe. It is a wholly-owned subsidiary of the Depository Trust & Clearing Corporation (DTCC), and is supported by DTCC's three decades of experience in operating critical market infrastructures. Therefore, it is well placed to act as a Central Counterparty (CCP), enabling anonymous post-trade processing to provide netting, and a full range of risk management services. For more information, visit the EuroCCP website: www.euroccp.co.uk.
Securities on the Free Markets are admitted to Euroclear Bank, and settlement occurs automatically three days after the trade. The trades are cleared and guaranteed by LCH.Clearnet SA, under its own terms and conditions. For the Free Market securities that are not admitted to Euroclear Bank, the member involved in the trade may initiate a transfer order, which manages the formalities of registration and removal with the issuer or delegated transfer agent.
In the event of a defective settlement involving a security that is not cleared by LCH.Clearnet, NYSE Euronext can initiate a buy-in procedure or indemnity against the defaulting party on the 21st trading day after the theoretical delivery date, without warranty and in conformity with equity market practices. NYSE Euronext may modify the time frames mentioned above for a given security. In all cases, beyond a period of three months following the trade date, NYSE Euronext will no longer accept a buy-in request.
SmartPool executions are cleared via EuroCCP for all markets traded on SmartPool. Anonymity is offered through a central counterparty and settlement with local CSDs following local practices.
NYSE Euronext trading members benefit from a seamless clearing and settlement process across all our European markets.
Our current arrangement with LCH.Clearnet Group and the world’s leading cross-border settlement services provider Euroclear ensures that trades are processed efficiently and cost-effectively. NYSE Euronext Lisbon settlement services are similarly performed by Interbolsa and Caixa Geral de Depósitos. The process allows member firms to leverage cost and efficiency gains created by a CCP and settlement netting arrangement.
NYSE Euronext announced on 28 March 2012 that it intends to negotiate a new long-term arrangement with LCH.Clearnet S.A., preserving and strengthening the vital role played by Paris in the European financial markets. Subject to appropriate agreement on commercial and governance terms, the new agreement would replace the current arrangements which terminate in December 2013. Entering into a new contractual arrangement with LCH.Clearnet SA answers the strong requirement from clients that cash markets clearing is performed under a horizontal model, with the potential to allow for more consolidation and the attached economies of scale, in a highly competitive environment.
Meanwhile, for the derivatives markets, work is ongoing to leverage the NYSE Liffe derivatives clearing platform to consolidate all of its European derivatives into a single derivatives clearing house, delivering significant operational and margin efficiencies for clients. NYSE Euronext expects the fully self-sufficient Recognised Clearing House (RCH) in London to be completed, licensed and operational by the summer of 2013. The clearing of all of NYSE Liffe’s London contracts will transition into the new RCH at that time. Clearing for NYSE Euronext’s derivatives business traded in Amsterdam, Brussels, Lisbon and Paris, currently cleared with LCH.Clearnet SA in Paris, will be transferred to the new RCH in London early in the first quarter of 2014, subject to regulatory approval and finalization of precise timings with LCH Clearnet SA.
LCH.Clearnet SA provides clearing services on NYSE Euronext’s Amsterdam, Brussels, Lisbon and Paris exchanges, providing clearing members the unique benefits of multilateral netting, counterparty risk management, straight through processing, and counterparty anonymity.
All transactions submitted to LCH.Clearnet SA are registered on a real-time basis in its clearing system in the name of the clearing member. Upon registration, novation occurs.
The cash clearing system is open for the registration of trades between 09:00 CET to 17:40 CET. Once the clearing system has received confirmation of eligible transactions, trades are governed under the rules of the LCH.Clearnet SA rulebook.
Transactions registered in the cash clearing system margins are required to cover the liquidation risk and the negotiation risk, according to SPAN® calculations.
Members of LCH.Clearnet are eligible to clear products subject to approval. More information about membership can be found in our Members section.
For more information about the system process, trade and settlement management, rules and clearing timetable, please visit: LCH Clearnet Cash Equities.
LCH.Clearnet provides clearing services to NYSE Arca Europe and SmartPool.
For more information, please visit: LCH Clearnet.