Misplaced Pages

#851148

42-535: As of 2012, LCH cleared approximately 50% of the global interest rate swap market, and was the second largest clearer of bonds and repos in the world, providing services across 13 government debt markets. In addition, LCH clears a broad range of asset classes including: commodities , securities , exchange traded derivatives , credit default swaps , energy contracts , freight derivatives , interest rate swaps , foreign exchange and Euro and Sterling denominated bonds and repos. LCH's members comprise many of

84-579: A Reserve Bank are eligible to use the service to send payments directly to, or receive payments from, other participants. Depository institutions can also use a correspondent relationship with a Fedwire participant to make or receive transfers indirectly through the system. Participants generally use Fedwire to handle large-value, time-critical payments, such as payments to settle interbank purchases and sales of federal funds; to purchase, sell, or finance securities transactions; to disburse or repay large loans; and to settle real estate transactions. The Department of

126-435: A buyer or seller should become insolvent prior to settlement. Processes included in clearing are reporting /monitoring, risk margining , netting of trades to single positions, tax handling, and failure handling. Systemically important payment systems (SIPS) are payment systems which have the characteristic that a failure of these systems could potentially endanger the operation of the whole economy. In general, these are

168-524: A clearing service for the registration of OTC Forward Freight Agreements (FFAs) for the most actively traded routes; thirteen dry and ten wet routes, as well as options on the four dry timecharter routes: Capesize, Panamax, Supramax and Handysize. LCH, as a member of the Container Freight Derivatives Association, launched a clearing service for the containerised freight market. The service provides an independent clearing service for

210-464: A pan-European equities market share of nearly 20%, leading to an acquisition offer. BATS Trading Limited (BATS Europe) was established in 2008 by U.S. exchange operator BATS Global Markets. In April 2008, BATS named Mark Hemsley as chief executive officer and Paul O’Donnell as chief operating officer. BATS Europe was launched later that year on 31 October 2008. By 2010, BATS Europe was the second-largest MTF, behind Chi-X Europe, leading to it acquiring

252-575: A pan-European marketshare of more than 25% and 24.6% in April 2012. By April 2012 the technology integration between the two platforms was complete and Chi-X Europe customers were migrated onto the BATS Europe platform. In March 2013, after Europe's two largest cash equities clearing providers unveiled plans to merge, BATS Chi-X Europe announced it would take a 25% stake in the new entity, which will be called EuroCCP N.V. During June 2016, it announced it

294-584: A result. The United States clearing system, known as CHIPS , is the largest clearing system in the world. Millions of transactions, valued in the trillions of dollars, are conducted between sellers and purchasers of goods, services, or financial assets daily. Most of the payments making up the transactions flow between several banks, most of which maintain accounts with the Federal Reserve banks. The Federal Reserve therefore performs an intermediary role, clearing and settling international bank payments. Prior to

336-409: A standard settlement period of 14 days, which was the time it usually took for a courier to make the journey between the two cities. Most exchanges copied the model, which was used for the next few hundred years. With the advent of the computer in the 1970s and 1980s, there was a move to reduce settlement times in most exchanges, leading by stages to a current standard of one day, known as T+1 . With

378-471: A subsidiary of BATS Global Markets since 2011. It is a low latency, low cost alternative to exchange traded equities and exchange-traded funds (ETFs) that are listed on primary exchanges such as the London Stock Exchange , Frankfurt Stock Exchange , Euronext and OMX . Previously a multilateral trading facility (MTF), BATS Chi-X Europe received Recognised Investment Exchange (RIE) status from

420-540: Is an electronic payment system, developed jointly by the private sector and the Federal Reserve in the early 1970s as a more efficient alternative to checks. Since then, the ACH has evolved into a nationwide mechanism that processes credit and debit transfers electronically. ACH credit transfers are used to make direct deposit payroll payments and corporate payments to vendors. ACH debit transfers are used by consumers to authorize

462-560: The Federal Reserve System is a SIPS. The first payment method that required clearing was cheques, as cheques would have to be returned to the issuing bank for payment. Though many debit cards are drawn against chequing accounts, direct deposit and point-of-purchase electronic payments are cleared through networks separate from the cheque clearing system (in the United States, the Federal Reserve's Automated Clearing House and

SECTION 10

#1732855504852

504-620: The London Produce Clearing House , established in 1888, and the Paris-based Clearnet , established in 1969. Both developed from clearing commodity transactions. They merged in 2003 to form LCH.Clearnet. In 2013, the London Stock Exchange Group acquired a majority stake in the business. In 2016 LCH.Clearnet dropped Clearnet from its branding name. LCH provides clearing or central counterparty services in

546-509: The 10 largest European markets, including 15% of trades in FTSE 100 stocks" and also that "In London, Europe's main equity center, Chi-X Europe is now trading nearly 15% of U.K. equities, a performance that has contributed to the London Stock Exchange's market share falling below 75% for the first time." In February 2010, Chi-X Europe's chief operating officer Hirander Misra suddenly quit

588-657: The 1980s, such as the 1986 big bang in the UK, led to a number of exchanges separating or contracting the clearing and settlement functions to dedicated organisations. In some specialist financial markets, clearing had already been separate from trading. One example was the London Clearing House (later renamed LCH.Clearnet ), which, since the 1950s, cleared derivatives and commodities for a number of London exchanges. Clearing houses who clear financial instruments, such as LCH, are generally called central counterparties (CCPs) . In

630-522: The Financial Conduct Authority (FCA) in May 2013, and was from then authorised to operate a Regulated Market for primary listings alongside its existing business. Initially two separate entities, Chi-X Europe was the first pan-European equities exchange to launch in 2007; BATS Europe was launched in 2008. In February 2011, BATS Global Markets agreed to buy Chi-X Europe for $ 300 million. The deal

672-425: The London Stock Exchange (LSE), SIX Swiss Exchange, BATS Chi-X Europe, NYSE Euronext , Bourse de Luxembourg and Equiduct. LCH runs a clearing service for contracts for difference (CFDs). CFDs were first launched in the UK in the early 90s as a short access product. Since then their use has grown across the world. LCH's centrally cleared CFD (ccCFD) service, in conjunction with Chi-X Europe , are an alternative to

714-745: The Treasury, other federal agencies, and government-sponsored enterprises also use the Fedwire Funds Service to disburse and collect funds. In 2003, the Reserve Banks processed 123 million Fed-wire payments having a total value of $ 436.7 trillion. The Fedwire Securities Service provides safekeeping, transfer, and settlement services for securities issued by the Treasury, federal agencies, government-sponsored enterprises, and certain international organizations. The Reserve Banks perform these services as fiscal agents for these entities. Securities are safekept in

756-472: The U.S. Treasury to hold securities accounts). Other parties, specifically brokers and dealers, typically hold and transfer securities through depository institutions that are Fedwire participants and that provide specialized government securities clearing services. In 2003, the Fedwire Securities Service processed 20.4 million securities transfers with a value of $ 267.6 trillion. The ACH Network

798-778: The US electricity trading on the Nodal Exchange (the first independent electronic commodities exchange offering locational forward trading products and services to participants in the organised North American power markets). LCH also provided services for Bluenext Futures EUA and Bluenext Futures CER, and today future contracts on EU Allowances and on Certified Emission Reductions. EquityClear, LCH's equity clearing service, offers clearing for equities and equity equivalents such as exchange traded funds (ETFs), exchange traded commodities (ETCs), real estate investment trusts (REITS) and exchange traded bonds. LCH clears equity-based trades that are executed on

840-412: The advent of electronic settlement, and a move to dematerialisation of securities , standardised clearing systems were required, as well as standardised securities depositories , custodians and registrars . Until this point, many exchanges would act as their own clearing house, however the additional computer systems required to handle large volumes of trades, and the opening of new financial markets in

882-465: The completion of the clearing, the banks settle payment transactions by debiting the accounts of the depository institutions, while crediting the accounts of depository institutions receiving the payments. The Fedwire Funds Service provides a real-time gross settlement system in which more than 9,500 participants are able to initiate electronic funds transfers that are immediate, final, and irrevocable. Depository institutions that maintain an account with

SECTION 20

#1732855504852

924-704: The core requirements as determined by key industry and policy groups, including ISDA, CESR, the ECB and the European Commission. LCH is the largest a user-owned and user-governed global supplier of clearing services to the derivatives markets. This is either directly to the user community or by operating the clearing process on behalf of a third party via an insourcing arrangement, providing services to clients for Short Term Interest Rates (STIRs), Indexes and Equity derivatives. This includes credit derivatives. LCH provides clearing services to clients for OTC Emissions trading and

966-502: The firm to "pursue other interests". Misra had helped guide the company along with Randall, from its start until it became the second-largest market by share. Despite the management turnover, Chi-X Europe continued to grow, steadily increasing its market share and regularly introducing new products, such as the Chi-Delta dark book it introduced in April 2009. By mid-2010, the company had been profitable for several quarters and had reached

1008-799: The following markets: LCH provides clearing and settlement services for both the exchange-traded and the OTC commodity markets. LCH clears commodities including non-ferrous metals (100 million metal trades are cleared annually), plastics and steel which are exchange traded on the London Metal Exchange , as well as a broad range of futures and options contracts covering soft and agricultural products. It also clears over-the-counter products including gold, coal, steel and iron ore and fertilizer swaps. The international CDSClear service provides full straight-through processing (STP) multilateral clearing, reduced counterparty risk and post-trade anonymity and encompasses

1050-486: The form of a cheque or electronic payment request) into the actual movement of money from one account to another. Clearing houses were formed to facilitate such transactions among banks. In trading, clearing is necessary because the speed of trades is much faster than the cycle time for completing the underlying transaction. It involves the management of post-trading, pre-settlement credit exposures to ensure that trades are settled in accordance with market rules, even if

1092-521: The form of electronic records of securities held in custody accounts. Securities are transferred according to instructions provided by parties with access to the system. Access to the Fed-wire Securities Service is limited to depository institutions that maintain accounts with a Reserve Bank, and a few other organizations, such as federal agencies, government-sponsored enterprises, and state government treasurer’s offices (which are designated by

1134-549: The major global financial institutions including almost all of the major investment banks , broker dealers and international commodity houses . LCH, being a clearing house, sits in the middle of a trade – assuming the counterparty risk involved when two parties trade and guaranteeing the settlement of the trade. To mitigate the risks involved it imposes certain minimum requirements on its members and collects initial and variation margin (or collateral) from them for trades that have been executed. LCH traces its roots back to

1176-481: The major payment clearing or real-time gross settlement systems of individual countries, but in the case of Europe, there are certain pan-European payment systems. TARGET2 is a pan-European SIPS dealing with major inter-bank payments. STEP2 , operated by the Euro Banking Association is a major pan-European clearing system for retail payments which has the potential to become a SIPS. In the United States,

1218-469: The most actively traded currencies in the NDF marketplace. LCH is regulated or overseen by the national securities regulator and/or central bank in each jurisdiction from which it operates. Clearing (finance) In banking and finance , clearing refers to all activities from the time a commitment is made for a transaction until it is settled . This process turns the promise of payment (for example, in

1260-483: The other company. In April 2011, BATS Global Markets confirmed that Mark Hemsley, CEO of BATS Europe, will be appointed CEO of the combined entity following BATS' acquisition of Chi-X Europe. The joint entity, BATS Chi-X Europe, covered 1,800 stocks, in 25 indices and 15 European countries, as of early 2012. Between January and April 2012, BATS Chi-X Europe was the largest pan-European equities exchange in terms of value traded. In December 2011, BATS Chi-X Europe had

1302-426: The payment of insurance premiums, mortgages, loans, and other bills from their account. The ACH is also used by businesses to concentrate funds at a primary bank and to make payments to other businesses. In 2003, the Reserve Banks processed 6.5 billion ACH payments with a value of $ 16.8 trillion. Chi-X Europe BATS Chi-X Europe is a London -based, order-driven pan-European equity exchange that has been

LCH (clearing house) - Misplaced Pages Continue

1344-554: The physical stock certificate and the payment to the clearing house, who would then ensure the certificate was handed over and the payment complete. This process is known as delivery versus payment . During the 1700s the Amsterdam Stock Exchange had close links with the London Stock Exchange , and the two would often list each other's stocks. To clear the trades, time was required for the physical stock certificate or cash to move from Amsterdam to London and back. This led to

1386-438: The private Electronic Payments Network ). Securities clearing was required to ensure payment had been received and the physical stock certificate delivered. This caused a few days’ delay between the trade date and final settlement . To reduce the risk associated with failure to deliver on the trade on settlement date , a clearing agent or clearing house often sat between the trading parties. The trading parties would deliver

1428-510: The registration of OTC Container Freight Swap Agreements (CFSAs) for four of the most actively traded routes out of Shanghai. SwapClear is a global clearing service for OTC interest rate swaps , and as of 2010, cleared more than 50% of the global notional market. Launched in 1999, SwapClear initially cleared plain vanilla interest rate swaps in four major currencies. It moved on to clear swaps in 17 currencies; USD, EUR, and GBP out to 50 years, AUD, CAD, CHF, SEK and vanilla JPY out to 30 years and

1470-492: The remaining nine currencies out to ten years. It also clears overnight indexed swaps out to 2 years in USD, EUR, GBP and CHF. In September 2008, LCH successfully managed Lehman Brothers’ US $ 9 trillion interest rate swap default, comprising over 66,000 trades, by implementing SwapClear's default management process. The default was fully resolved well within the margin held and at no loss to other market participants. ForexClear covers

1512-499: The traditionally over-the-counter traded CFDs. LCH provides clearing services covering French, Italian and Spanish government debts, on cash and repo transactions traded by financial institutions including Euro-MTS, MTS-France, MTS Italy, ICAP (BrokerTec) and Tullett Prebon, and trade providers such as the Euroclear Trade Capture and Matching System (Euroclear's matching system), and Viel/Tradition. LCH's RepoClear service

1554-468: The wake of the financial crisis of 2007–08 the G20 leaders agreed at the 2009 Pittsburgh Summit that all standardised derivatives contracts should be traded on exchanges or electronic trading platforms and cleared through central counterparties (CCPs). Although some derivatives were already traded on exchange and cleared, many over-the-counter derivatives that met the criteria needed to be novated to CCPs as

1596-611: Was established in partnership with leading banks in 1999, for some 13 European government repo and cash bond markets, and a range of pan-European €GC Baskets. As of 2012, monthly volumes averaged c. €13 trillion, and RepoClear clears cash bond and repo trades in the following markets: Austrian, Belgian, Dutch, German, Irish, Finnish, Portuguese, Slovakian, Slovenian, Spanish and UK government bonds. Additional markets served include: German Jumbo Pfandbriefe and Supranationals, Agency and Sovereign. There are €12 trillion repo trades per month (based on nominal value) cleared through LCH. LCH provides

1638-399: Was eventually broadened to include a consortium of major global financial institutions including BNP Paribas , Citadel , Citigroup , Credit Suisse , Fortis , GETCO Europe Ltd , Goldman Sachs , Merrill Lynch , Morgan Stanley , Optiver , Société Générale and UBS . However, on 1 December 2011, BATS Global Markets acquired the firm from the consortium. When it launched, Chi-X Europe

1680-726: Was referred by the Office of Fair Trading to the Competition Commission in June 2011 for further investigation to "determine whether a substantial lessening of competition is probable as a result of the anticipated merger." However, the Competition Commission approved the transaction in late November 2011, leading to BATS closing the deal on 30 November 2011. Chi-X Europe was established in 2007 by Instinet . Ownership in Chi-X Europe

1722-967: Was the first multilateral trading facility that launched in anticipation of the European Union 's November 2007 Markets in Financial Instruments Directive (MiFID), which paved the way for the introduction of alternative trading venues in Europe. In February 2009, Peter Randall, who took over CEO duties from Chairman Tony Mackay shortly after launch, quit Chi-X Europe unexpectedly and was replaced by Alasdair Haynes in December 2009. Randall reportedly left for "personal reasons". Citadel LLC named Randall as chief executive of Equiduct Systems on 18 December 2009. Also in February 2009, The Wall Street Journal reported that "Chi-X performed 9.1% of trades in

LCH (clearing house) - Misplaced Pages Continue

1764-550: Was to offer a free UK index series with real-time information to private and retail investors which included FTSE 100 rival, the Bats UK 100. Chi-X Europe is authorised by the Financial Conduct Authority (FCA) to operate a multilateral trading facility (MTF), as defined under MiFID , for the trading of pan-European securities. Chi-X Europe meets the same level of regulatory standards as traditional exchanges and receives

#851148