Euronext, LCH renew contract

london — Pan-European exchange Euronext has extended its contract with Britain’s LCH in a surprise move that could help defuse tension over where euro-denominated trades are cleared after Brexit.

Clearing, an arcane part of the plumbing of financial markets, has become highly politicised since Britain’s vote to leave the European Union in June last year.

Euronext had said in April that it planned to use Intercontinental Exchange in the Netherlands for clearing, when its contract with LCH, which is owned by the London Stock Exchange Group, expired in 2018.

Our clients tell us they expect to clear more business in the euro zone after Brexit Lee Hodgkinson, Euronext, head of markets, global sales

But on Tuesday Euronext and LCH said they have signed binding terms for a 10-year clearing deal they expect to complete in the fourth quarter of this year.

Clearing ensures that a stock, bond or derivatives transaction is completed safely and smoothly, even if one side of the deal goes bust.

Under the deal, Euronext will swap its 2.3 per cent stake in LCH Group in London for an 11.1 per cent share in LCH’s Paris unit, giving Euronext and its shareholders a financial incentive to increase clearing volumes in France.

“Our clients tell us they expect to clear more business in the euro zone after Brexit than they do today, so we will be working closely with LCH SA to develop new products,” Lee Hodgkinson, Euronext’s head of markets and global sales, said. —