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Euronext renews clearing agreement with LCH SA, becomes minority shareholder

First Published 8th August 2017

Euronext to swap its current 2.3% stake in LCH Group for an 11.1% stake in LCH SA, a direct investment in the multi-asset Eurozone based CCP

Stéphane Boujnah, Euronext

Stéphane Boujnah, Euronext

Euronext has signed binding terms with LCH SA, LCH Group and London Stock Exchange Group for the continued provision of clearing services for its derivatives products.

The agreement covers the clearing of financial derivatives and commodity derivatives for a period of 10 years offering comparable financial conditions. Euronext and LCH SA will work together to develop new products for the benefit of clearing members and market participants. The formal clearing services agreement is expected to be completed during Q4 2017.

Euronext will swap its current 2.3% stake in LCH Group for an 11.1% stake in LCH SA, subject to regulatory approvals and other customary conditions. LCH SA is a leading multi-asset CCP, based in the Eurozone, with substantial growth opportunities in the fixed income and CDS businesses. This transaction will strengthen the long-standing relationship between Euronext and LCH SA, and cement the strategic future of LCH SA.

Euronext will remain on the Board of LCH SA following completion of the share swap. Euronext will also nominate one representative to LCH SA Audit Committee and will continue to be represented at LCH SA Risk Committee. A new Consultative Committee dedicated to Euronext derivatives business will be created.

Euronext and LCH SA will 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.

The parties have agreed that Euronext will have certain minority protection rights connected with its new shareholding in LCH SA. Euronext will have a pre-emption right in circumstances where LCH Group decides to sell more than 50% of the shares of LCH SA. The pre-emption right involves a right of first offer and subject to certain conditions, a matching right. In addition, LCH Group has a pre-emption right over a transfer of shares by Euronext and the ability to buy back Euronext's shares in certain circumstances where the derivatives agreement is terminated.

Stéphane Boujnah, CEO and Chairman of the Managing Board, Euronext N.V said: "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."