Clearing houses may face greater competition

David Hardy, former chief executive of London-based clearing house LCH.Clearnet, warned that clearing houses may face greater competition if they don’t lower fees and provide more services. Speaking to RiskNews at the Futures and Options Expo in Chicago, he said: “Clearing houses owned by exchanges say they face lots and lots of competition. But there isn’t real competition. If a bank wants to trade Eurodollar contracts through the New York Clearing Corporation, the possibility of that occurring is quite low.” Currently, futures and options on Eurodollar contracts can only be cleared through the Chicago Mercantile Exchange.

He pointed to “Project Turquoise” as an example of what may happen if the status quo remains. The European plan involves seven banks (Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Merrill Lynch, Morgan Stanley and UBS) creating an equities trading platform to rival the London Stock Exchange.

Earlier at the conference in a panel chaired by Hardy, heads of clearing houses at various exchanges were in agreement that clearing houses, or central counterparty (CCP) clearing organisations