Clearing Services for Global Markets A Framework for the Future Development of the Clearing Industry_10 pptx

347 Checking theory against reality – case studies of network strategies current status (section 8.2.1.4). The second part (Part II) analyses the case study, the results of which are derived from the interviewees’ assessment of the merger (section 8.2.1.5). Part I: Introduction 8.2.1.1 Profile of the partnering clearing houses 8.2.1.1.1 The London Clearing House The London Clearing House Ltd (LCH) was established in 1888 as the London Produce Clearing House to clear contracts for commodities such as coffee and sugartradedinLondon. 153 In 1973, the company became the International Commodities Clearing House Ltd (ICCH) to reflect the overseas activities it was pursuing at that time. A decade later, in the 1980s, the company and its focus changed radically, when ownership passed from United Dominions Trust to a consortium of six British clearing banks. At this time, the clearing house expanded its business to provide clearing services to the then Inter- national Petroleum Exchange (IPE, in 1981), London International Financial Futures Exchange (Liffe, in 1982) andLondonMetal Exchange (LME, in 1987). In the early 1990s, as overseas clear ing activities were discontinued, the com- pany was re-named the London Clearing House (LCH) to reflect its primary centre of activity, the London markets. For a time, it operated as an unlisted, not-for-profit private limited company under English law. In October 1996, majority ownership of LCH transferred to the whole clearing membership. The three exchanges (Liffe, LME and IPE) whose contracts it cleared acquired minority ownership. This resulted in clearing members holding 75 per cent, Liffe maintaining a 17.7 per cent stake, and LME and IPE holding a combined stake of 7.3 per cent in the CCP. Throughout the years, LCH has expanded its services. It began clearing cash equities in 1995. During the late 1990s and the early years of the new century, LCH expanded to introduce clearing for cash b onds, repos, inter-bank interest rate swaps and energy (gas and power). By 2003, LCH was acting as the central counterparty to its members in the following mar kets and products: r futures and options on Euronext.liffe, IPE and LME; r cash equities on the London Stock Exchange (LSE), virt-x and EDX; 153 For the following overview of LCH’s history, corporate structure and clearing activities, refer to www.lchclearnet.com; FOW (ed.) (2001); and FOW (ed.) (2003). 348 Clearing Services for Global Markets London Clearing House Ltd Clearing Members LIFFE LME, IPE 7.3%17.7%75% 100% Euronext Not-For-Profit Organisation Figure 8.21 Pre-merger ownership structure London Clearing House Source: Based on Euronext (ed.) (2003), p. 9. r repos and cash bonds; r inter-bank interest rate swaps; and r OTC energy swaps transacted on ICE (IntercontinentalExchange Inc.) and Endex (European Energy Derivatives Exchange). In 1998, LCH closed the year as the world’s third largest and Europe’s largest derivatives clearing house, with 266,889,517 contracts cleared. 154 In t he fol- lowing year, LCH was ousted by Eurex Clearing and Clearnet, which both had stronger growth in volumes. From 1999 to 2002, LCH alternated between being the world’s fifth or sixth largest derivatives clearing house and main- tained its status as Europe’s third largest derivatives clearing house. Market participants could apply to become a General Clearing Member (GCM) or an Individual Clearing Member (ICM) of LCH. The difference between these membership categories is that GCMs can clear their own trans- actions and their clients’ transactions as well as those of exchange participants that do not hold a clearing licence (NCMs), while ICMs are only able to clear their own transactions. All clearing members were required to purchase an LCH ‘A’ share at a price set by the Board, 155 comply with the clearing house’s minimum capital requirements, contribute to the clearing fund and fulfil 154 Refer to section 2.5 for details on LCH’s market share and a graphical overview of the world’s major derivatives clearing houses. All data is derived from FOW (ed.) (2001); FOW (ed.) (2003); and FOW (ed.) (2006). 155 As an example, in April 2003, the price for such a share was £297,615. Cf. FOW (ed.) (2003). 349 Checking theory against reality – case studies of network strategies additional operational requirements. 156 The requirement of holding shares in the clearing house was later abandoned and dropped as a prerequisite for becoming a clearing member of LCH. 8.2.1.1.2 Clearnet Clearnet SA (Clearnet) was established in 1888 as a French bank, the Banque Centrale de Compensation SA, to clear contracts traded in Paris commodity markets. 157 In 1990, it became a subsidiary of MATIF, 158 and then an indirect subsidiary of SBF – Bourse de Paris, when that body took over MATIF in 1998. In 1999, all of the regulated markets in Paris were brought together and subsequently run by a single body – the Soci ´ et ´ e des Bourses Franc¸aises (SBF). In March 2000, the SBF, the Amsterdam Exchanges and the Brussels Exchanges agreed to merge into an entity called Euronext. Following the Euronext merger, Clearnet merged with the clearing houses of the Brussels and Amsterdam exchanges, thus assuming the clearing activities previously undertaken by AEX-OptieClearing BV in Amsterdam and BXS Clearing in Brussels. 159 The integration of the CCPs was intended to provide central clearing within the Euronext Group and resulted in Clearnet, as a recognised bank under French law, becoming the clearing house for all transactions traded on the Euronext markets. 160 Clearnet operates through branch offices in Paris, Ams- terdam and Brussels, which were formed from the clear ing units used by the Euronext constituent exchanges prior to the merger. As a subsidiary of Euronext Paris, Clearnet operated as a for-profit French credit institution and had to abide by the banking regulations under the supervision of the Banque de France. The French banking authorities regularly monitored Clear net’s procedures and accounts. 156 For further details on the membership requirements, refer to www.lchclearnet.com. 157 For the following overview of Clearnet’s history, corporate structure and clearing activities, refer to www.lchclearnet.com; FOW (ed.) (2001); and FOW (ed.) (2003). 158 MATIF (March ´ e ` a Terme d’Instruments Financiers) was formed in 1986 with its own clearing house, La Chambre de Compensation des Instruments Financiers, which later became MATIF SA. In 1988, MATIF commenced trading commodities, having merged w ith the local commodity exchanges in Paris, Lille and Le Havre. It then took over the Banque Centrale de Compensation, which assumed the clearing function for commodities contracts. Cf. www.clearnetsa.com/about/history.asp. 159 Additional mergers in 2001 involved Liffe in London and BVLP in Portugal. Note that following the merger of Euronext and Liffe, LCH continued to provide clearing services for the London derivatives market. 160 The integration extended to the implementation of unified market rules and harmonised admission criteria, such as the implementation of standard capital adequacy and risk management procedures. French, Belgian and Dutch regulators reached an agreement to work in tandem to establish a homoge- nous legal framework and provide joint supervision. 350 Clearing Services for Global Markets Clearnet S.A. Euronext Euroclear 19.5%80.5% For-Profit Organisation Figure 8.22 Pre-merger ownership structure Clearnet Source: Based on Euronext (ed.) (2003), p. 9. Prior to the merger with LCH, Clearnet was 80.5 per cent owned by the Euronext Group and 19.5 per cent owned by Euroclear. Euronext is a 100 per cent publicly quoted company on the SBF. Euroclear Bank is 100 per cent member-owned (i.e. by banks) and for-profit. By 2003, as part of the Euronext Group, Clearnet was responsible for the clearing of all cash equities, bonds and derivatives traded on the Euronext exchanges. It additionally provided central counterparty and netting services to OTC bond and repo. markets. Transactions flowed to Clearnet for this purpose through a number of automated systems and gateways: EuroMTS, MTS France, MTS Italy, BrokerTec, eSpeed, SLAB, ETCMS and Viel & Cie Prominnofi. In 1999, Clearnet closed the year as the world’s fourth largest and Europe’s second largest derivatives clearing house, with 240,140,823 contracts cleared. 161 One year later, in 2000, with rising volumes, Clearnet climbed to become the world’s third largest derivatives clearing house. In the years prior to the merger with LCH, Clearnet had maintained its position as the world’s fourth largest and Europe’s second largest derivatives clearing house. Market participants were able to apply to become a General Clearing Member (GCM) or Individual Clearing Member (ICM). Both categories of clearing member were required to satisfy Clearnet’s rules on operational procedures dur ing regular audits and to maintain a minimum level of net assets. 161 Refer to section 2.5 for a graphical overview of the world’s major derivatives clearing houses. Market shares based on data provided by FOW (ed.) (2001); FOW (ed.) (2003); and FOW (ed.) (2006). 351 Checking theory against reality – case studies of network strategies 8.2.1.2 Background and objectives of the initiative In April 2000, LCH and Clearnet announced plans to form an alliance that would u ltimately result in a merger of both clear ing houses. 162 In December 2003, after initial negotiations had been abandoned and then re-launched, the merger was finally implemented. The underlying dynamics and background to these developments are briefly outlined in the following. When both clearing houses announced their initial plans to create a consol- idated European clearing house in April 2000, a joint venture was scheduled to be implemented by early 2001, with a full merger to follow. 163 Although integration plans were relatively substantial and detailed at this point in time, merger talks stagnated over the course of the year. Whereas Clearnet and its parent company, Euronext, were tied up with the integration of the exchange merger that had formed Euronext, 164 additional industry developments ham- pered the cooperation between Clearnet and LCH. As a reaction to the Euronext merger, Deutsche B ¨ orse and the London St ock Exchange (LSE) at the same time negotiated their so-called ‘iX’ venture. 165 The combination of the German and British exchanges tempted the major players to consider an alliance between the respective clearing houses, LCH and Eurex Clearing. 166 Over the course of the year, the likelihood of successfully implementing a joint venture or merger between LCH and Clearnet dimmed, and in October 2000, LCH affirmed that it had put negotiations with Clearnet on hold and had instead launched talks with ECAG. 167 LCH subsequently concentrated on a possible merger with its German counterpart, but these negotiations ultimately went nowhere. When the iX venture fell through, the appeal of negotiating a partnership between LCH and Eurex Clearing waned. In the midst of these developments in 2001, the European Secur ities Forum (ESF) published its blueprint for a single pan-European CCP, identifying a preference on the part of the major market participants (investment banks and brokers) for a clearing house outside exchange control and operating on a not-for -profit basis. 168 Most of the largest market participants supported the initiative led by the ESF on behalf of its twenty-eight international investment bank members to create an independent pan-European clearing system. The group was pushing for a horizontal clearing house for all markets. 169 This backdrop of public pressure and lobbying activities from market participants 162 Cf. Handelsblatt (ed.) (05.04.2000), p. 35; and Jones (2003). 163 Cf. Bank for International Settlements (ed.) (2000b), p. 42. 164 Cf. Kentouris (2000a), p. 11. 165 Cf. Sch ¨ onauer (2002), p. 27. 166 Cf. Kentouris (2000b), p. 1. 167 Cf. Handelsblatt (ed.) (13.10.2000), p. 44; and LCH.Clearnet (ed.) (2004c), pp. 4–5. 168 Cf. FOW (ed.) (2001). 169 Cf. Kharouf (2001). 352 Clearing Services for Global Markets complicated further negotiations between LCH/Clearnet and LCH/ECAG, respectively. Based on the constellation at that t ime, Euronext would have controlled almost 50 per cent of the merged entity – a scenario that was not welcomed by market participants, many of whom publicly opposed ver- tical integration. LCH’s not-for-profit structure as opposed to ECAG’s and Clearnet’s for-profit orientation thus constituted a stumbling block to merger activity: as recipients of profit-sharing benefits via annual rebates and as holders of a 75 per cent stake in the clearing house, LCH’s members certainly wanted a say in any merger proceedings to make sure that any M&A initiative would be realised in their best interest. Cooperation with for-profit clearing houses such as Clearnet and Eurex Clearing, both part of a recently publicly listed group, thus proved to be difficult. It was only by the end of 2001 that merger talks between Clearnet and LCH regained traction. At this point in time, investment banks were continuing to put pressure on clearing houses to reduce fees as well as lobbying against the vertical integration of clearing houses and for the creation of a user-controlled single European CCP based on a horizontal model. In the exchange arena, the fate of European exchange consolidation was at the centre of debate and the ownership of Liffe and LSE, both of which were acquisitions targets at that time, was considered key in this arena. When Euronext succeeded in acquiring the London derivatives market Liffe – one of LCH’s most important customers – in November 2001, it suddenly held significant stakes in both clearing houses. A basis for renewed Anglo-French merger talks was thus created. 170 Negotiations were subsequently resurrected and this time culmi- nated in a successful merger agreement that was implemented in Decem- ber 2003: LCH and Clearnet merged under a UK holding company named LCH.Clearnet Group Ltd. After lengthy negotiations, the initial difficulties relating to the ownership structure of LCH were solved, 171 and the shareholding members of LCH finally agreed to the merger once Euronext, despite remaining the largest single shareholder of the merged entity, agreed to reduce its shareholding and limit its voting rights. 172 This helped to assuage the fears of the investment banks and brokers, whose primary objective continued to be the impediment of the vertical integration of clearing house structures in Europe. 170 Cf. Hellmann (2003), p. 3. 171 LCH’s users had to be persuaded to accept the end of their previous arrangement, in which they had majority-governed and owned their clearing house. For their part, Euronext’s shareholders had to be persuaded to give up full control over and ownership of a profitable subsidiary. 172 Further details on the concept and structure of the initiative are outlined in section 8.2.1.3. 353 Checking theory against reality – case studies of network strategies The primary objectives pursued by this network initiative at the time of its implementation were thus compelling to both partners: for LCH, being majority-owned and controlled by its clearing members, the merger with Clearnet constituted an opportunity towards the creation of a more centralised European CCP and the further integration of Europe’s financial mar kets. 173 By combining two of Europe’slargestclearing houses,banksand brokers hoped to reduce clearing-related costs by avoiding duplication of clearing technology in Europe, 174 benefit from economies of scale on the part of the merging CCPs and move towards a more seamless securities market. 175 Backing for the merger consequently also came from the ESF. 176 With Euronext’s agreement to limit its voting rights and reduce its shareholding, Clearnet was thus an ideal partner for LCH and its owners. Euronext’s rationale for agreeing to the deal with LCH was driven by other motives, however: 177 Clearnet had limited growth prospects at that time, and its fees were expected to come under attack from market participants; LCH, on the o ther hand, had more promising prospects for growth. Through continued participation in the merged entity, Euronext hoped to benefit not only from significant financial returns, but also from considerably enhanced commercial opportunities. 178 Financial gains resulted from liquidating parts of Euronext’s shareholding in Clearnet, and were also expected to come from the clearing house’s proclaimed dividend policy of distributing at least 50 per cent of annual distributable profits. 179 Furthermore, it was hoped that the merger would translate into commercial opportunities for Euronext: Euronext believed that the merged entity could serve as a catalyst for fur- ther CCP consolidation in Europe. Plus, as the expected ‘future part ner of choice for CCPs and international markets’, LCH.Clearnet’s broad interna- tional client base could thus support Euronext’s growth, diversification and globalisation strategies. 180 Additionally, there was a chance that the deal could further Euronext’s ambition to merge with the LSE, 181 and by serving to align Euronext with the demands of the ESF and the major market participants, 173 Even if this move would ultimately fail to lead to the creation of a single European CCP, from the viewpoint of LCH and its owners it was a means of creating a viable competitor to Eurex Clearing, the vertically integrated clearing house of DBAG, which had risen to become the world’s largest derivatives clearing house in 2002 and 2003. Supporting the merger of LCH and Clearnet thus had the benefit of creating a counterweight in Europe that would at least be partially controlled and owned by clearing members. 174 Cf. Jones (2003). 175 Cf. Ascarelli (2003), p. M1. 176 Cf. Skorecki (2003a), p. 29. 177 Cf. Dickson (2003), p. 22. 178 Cf. Euronext (ed.) (2003), p. 6. 179 Cf. Euronext (ed.) (2003), p. 20. 180 Cf. Euronext (ed.) (2003), p. 6. 181 LCH had started to clear the most liquid equities at the LSE in the first quarter of 2001. 354 Clearing Services for Global Markets the merger was also considered to be helpful in isolating Deutsche B ¨ orse with its vertical silo strategy. Finally, cost savings generated by LCH.Clearnet for Euronext’s clients were expected to enhance volumes and liquidity on the Euronext markets. The merger agreement signed between LCH and Clearnet consequently offered a number of compelling benefits: r The clearing houses brought complementary products to the venture. 182 LCH’s core products were fixed income, whereas Clearnet was more focused on cash equities clearing. r Further commercialopportunities for the newly created entity and enhanced value for market participants could therefore arise through extension to a larger geographic zone and a broader range of products. 183 r The merged entity would be able to take trades from a wide variety of trading platforms, w hich was considered a major step towards the further integration of the European capital market infr astructure. 184 The deal thus satisfied market participants’ demands for the continued consolidation of European clearing houses. 185 r Potential IT-related and non-IT-related merger synergies were envisaged to translate into substantial savings in clearing members’ own businesses, 186 which market participants had also long demanded. r Efficiency improvements, including these substantial cost reductions, could lead to value creation for both clients and shareholders of the new CCP. 187 8.2.1.3 Concept and structure of the initiative In May 2002, Euronext Chief Executive Officer (CEO) Jean-Francois Th ´ eodore confirmed that talks had taken place between Clearnet and LCH, but did not prov ide specifics on the nature of the potential cooperation. Due to regu- latory complexities and problems concerning the ownership and corporate structures of both clearing houses, 188 it was not until one year later – in June 2003 – that the merger was officially announced. The main debates among the parties concerned the corporate structure (for-profit versus not-for-profit) of the CCP, the distribution of shareholding and voting rights between the exchanges and clearing members, and under which regulatory regime the merged entity should operate, i.e. which European body ought to be given ultimate regulatory authority over the multi-national clearing house. 189 182 Cf. Gidel (2000). 183 Cf. Euronext (ed.) (2003), p. 16. 184 Cf. Neue Z ¨ uricher Zeitung (ed.) (26.06.2003), p. 23. 185 Cf. Grass/Davis (2003), p. 19. 186 Cf. Euronext (ed.) (2003), p. 15. 187 Cf. Euronext (ed.) (2003), p. 5. 188 Cf. Sch ¨ onauer (2003a), p. 23. 189 Cf. Handelsblatt (ed.) (26.06.2003), p. 19. 355 Checking theory against reality – case studies of network strategies In addition to myriad finalisation details and the satisfaction of various conditions – including obtaining the necessary regulatory approvals 190 –the parties to the deal would face several more hurdles in the months following the merger announcement. The LSE, confronted with the prospect of Euronext’s future influence in the LCH.Clearnet Group and fearful that Euronext would not only fortify its growing influence in London, 191 but also use its share- holding in the clearing house to exact preferential treatment from the merged entity, was visibly discontent with the merger. 192 It subsequently threatened to put an end to its established clearing relationship with LCH and proceeded to launch negotiations with Eurex Clearing and the European arm of DTCC regarding the future provision of clearing services. 193 These manoeuvres obvi - ously posed a threat to the successful realisation of the merger agreement. 194 It was only when the dispute was finally settled – LCH accommodated the LSE with a reduction in fees, and the LSE decided in November 2003 to maintain its existing relationship with LCH – that the merger negotiations could resume. The merger was completed in late 2003, with the establishment of the LCH.Clearnet Group Ltd (LCH.C Group) on 19 D ecember and the subsequent acquisition of Clearnet on 22 December 2003. 195 The final terms of the merger were designed to st rike a balance between the shareholders of Euronext and LCH’s users in order to garner their support for the deal. A brief summary of the terms of the merger follows. 196 LCH and Clearnet became wholly owned subsidiaries of the new holding company LCH.C Group, which would operate as an unlisted, for-profit, private lim- ited company incorporated in England. The operating subsidiaries based in London and Paris, LCH and Clearnet, were re-branded as LCH.Clearnet Ltd (LCH.C Ltd) and LCH.Clearnet SA (LCH.CSA),respectively. Central counter- party clearing services thus continued to be provided through these operating companies. 197 Consequently, LCH.C Ltd continued to be supervised by the 190 Cf. LCH.Clearnet (ed.) (2003b), p. 3. 191 Cf. Jones (2003). 192 Cf. Handelsblatt (ed.) (15.10.2003), p. 20. 193 Cf. Sch ¨ onauer (2003b), p. 21; and FAZ (ed.) (02.07.2003), p. 22. 194 Cf. Sch ¨ onauer (2003c), p. 23. Despite the fact that volumes provided by the LSE merely amounted to 6.5 per cent of LCH’s cleared volumes, the question of whether LCH or Eurex would provide future clearing services to the London exchange was expected to give direction to the issue of European exchange consolidation. Were the LSE to select ECAG as its future clearing house, the likelihood of a potential merger between DBAG and the LSE would probably increase. In this case, the incentive for Euronext to agree to a merger of Clearnet and LCH would ultimately have to be reconsidered. 195 Cf. LCH.Clearnet (ed.) (2004b), p. 4. 196 For the following overview of the merger details, refer to LCH.Clearnet (ed.) (2003a); Euronext (ed.) (2003); and LCH.Clearnet (ed.) (2003b). 197 Clearnet’s existing proximity service representation in Brussels and Amsterdam was thus also maintained. 356 Clearing Services for Global Markets LCH.Clearnet Group Ltd Clearing Members Euronext (incl. LIFFE) Euroclear 9.8%41.5%45.1% For-Profit Organisation LCH.Clearnet SA LCH.Clearnet Ltd 100%100% LME, IPE 3.6% Figure 8.23 Post-merger ownership structure LCH.Clearnet Group, as of January 2004 Source: Based on Euronext (ed.) (2003), p. 9. UK Financial Services Authority (FSA) and LCH.C SA remained under the watch of French banking authorities working with other relevant European regulatory authorities. Although the holding company is incorporated in the UK, as the financial holding company of a group in which Clearnet is the only credit institution, LCH.C Group is supervised on a consolidated basis by the French banking regulatory authorities. The deal valued the merged entity at €1.2 billion, with Clearnet and LCHeachvaluedat€600 million. To ensure the group’s independence from Euronext (LCH.C Group’s largest single shareholder), the exchange sold 7.6 per cent of LCH.Clearnet to current clearing members of LCH for approx- imately €91 million, bringing its total share to 41.5 per cent. In addition, Euronext’s voting rights were capped at 24.9 per cent. The final sharehold- ing structure therefore resulted in the exchanges and clearing members both holding 45.1 per cent of the group; the remaining 9.8 per cent are held by Euroclear . 198 Given the different shareholding structures of LCH and Clearnet prior to the merger – one user-dominated, the other exchange-dominated – the post-merger ownership structure struck a balance between both parties and avoided the dominance of one over the another. 199 198 To benefit its shareholders, LCH.C Group opted to pursue a dividend policy of distributing at least 50 per cent of annual distributable profits. From the financial year 2006 onwards, the group has sought toachieveanEBITtargetof€150 million. Once this target is achieved in any given year, 70 per cent of the excess will be made available for the benefit of users. 199 Cf. LCH.Clearnet (ed.) (2004c), p. 2. [...]... but also with regard to the political and regulatory issues raised In their view, the costs and complexities related to the set-up of a single European CCP on the part of the clearing houses as well as their clearing members dwarf the benefits of aggregation To me it is really as much a question of the cost of changing as it is a question of the efficiency at a particular point.277 Another drawback of a. .. their potential savings,233 they nonetheless had political reasons for supporting the initiative.234 Although these findings indicate that many clearing members affected by the transaction were in fact aware at the time of the merger that the realisation of integration benefits would take time and that the ultimate magnitude of cost savings was uncertain, the majority of stakeholders naturally expected... processes are thus not identical, and due to the clearing houses’ installed bases, they are not necessarily interchangeable In order for CCP networks to attract additional clearing houses and thus serve as catalysts for the further harmonisation and integration of the clearing industry, a network initiative that enables the potential partner CCPs to leverage their installed base must be chosen Local market... of five provided an assessment Whereas a reasonable number of interviewed exchanges gave feedback 366 Clearing Services for Global Markets The reasons for interviewees’ negative assessment of the merger initiative are briefly summarised in the following Respondents criticised the merger as being poorly planned in the first place, and then badly executed and managed They were particularly critical of the. .. partner of choice for European CCPs and international markets around the world The clearing houses’ services and processes 260 Note that in the context of the LCH.Clearnet merger, regionally-to-globally active clearing members with either a prop or an agency focus (CMPR-G /CMAR-G ) have thus far been unable to realise the maximum potential P&L impact from the merger initiative, because the structure of the. .. operating companies remain separate for legal and regulatory purposes, the group management is to ensure that they are managed as a single entity wherever practical and beneficial As LCH.C Ltd and LCH.C SA continued to be distinct legal entities subsequent to the merger, they maintained their own rulebooks and processes applicable to clearing members and clearing member applicants The implementation of. .. participation; participation is obligatory The magnitude of the increase of indirect costs depends on the structure of the M &A initiative and the characteristics of the clearing member firm itself r Regionally-to-globally active clearing members (CM PR-G /CMAR-G ) benefit from the opportunity to clear many markets through their home clearing house, because they are thereby able to disintermediate the GCM(s) they... out of seventy-nine) of the interviewees gave concrete feedback.228 In terms of the response rate, the group of European-based clearing members was the best informed about the merger; all of the London-based clearing members gave an assessment and roughly 86 per cent of the clearers based in Continental Europe were able to contribute an opinion.229 In terms of their answers, a small majority of the. .. does not enable clearing members to choose between the two clearing houses for processing all markets and products served by the group In fact, the merger has translated into costs that are not balanced by equally great internal savings for some clearing members On the other hand, the CMPR-G /CMAR-G groups have realised some benefits from the reduction of clearing house fees Globally active clearing members... have the leeway to benefit from and further leverage their installed base.259 258 259 At the time of the merger, LCH.C Group announced that their objective was to act as catalyst for further CCP consolidation in Europe and internationally in becoming the partner of choice for CCPs and international markets around the world’ LCH.Clearnet (ed.) (200 3a) , Foreword This vision has not been realised to date, . operate as distinct CCPs, the technological standardisation will create savings for the clearing houses and their users. Integrating the IT platform also lays the foundation for the third phase of. so ingrained at a local level that to change them dramatically could affect the structure of the market and pose a threat to volume. 225 As a result of all of the difficulties related to the post-merger. many clearing members affected by the transaction were in fact aware at the time of the merger that the real- isation of integr ation benefits would take time and that the ultimate mag- nitude of