The London Stock Exchange's defence against the OM takeover bid has been boosted with the publication of a low-cost settlement solution for the proposed iX exchange. The LSE and iX merger partner Deutsche Borse are fighting off a hostile bid for the London exchange from Swedish technology group OM.
The settlement solution proposed by Clearstream International and Crestco will mean that customers will continue to be able to settle transactions in all iX securities and currencies through their existing interfaces to Crest or Clearstream. This means that the settlement cost of a cross-border iX trade is reduced to the same low-level as a domestic trade.
Local settlements can cost 90% less than cross-border transactions.
The settlement model supports iX trades with or without a central counterparty (CCP). The model with CCP provides basic straight-through processing of iX trades. The model without CCP involvement uses a full delivery versus payment link between Crest and Clearstream.
Crestco and Clearstream International anticipate working with two CCPs as part of the post-trade solution for iX – one for the UK market (London Clearing House) and one for the German market (Eurex).
Don Cruickshank, LSE chairman welcomed the news: “This solution is good news for our market users as they seek to drive down costs for their clients. By building on existing arrangements for clearing and settlement, it minimises the costs of central infrastructure and avoids the need for customers of iX-international exchanges to invest in further interfaces to clearing or settlement systems."
Iain Saville, Crestco chief executive says the solution will be available to market participants trading in Frankfurt and London, irrespective of the success or otherwise of the iX merger.
Market competitors have dismissed the solution as maintaining the status quo in Europe's fragmented settlement systems.