By Luke Jeffs

Euronext currently uses the French arm of LCH, part of the LSE Group, to clear its equity and derivatives trades, due to a merger between the London and Paris-based clearing houses in 2003 and the product of that merger being acquired by the London Stock Exchange in 2012.

Boujnah’s current clearing deal with LCH was struck after his 2016 bid to buy LCH SA was effectively killed by the European Union’s decision to block the merger between the LSE Group and Deutsche Boerse, a condition of which was the sale of the French clearer.

He said: “In 2016 the asset was for sale in the context of a remedy demanded by the European Commission to enable the attempted merger between Deutsche Boerse and the London Stock Exchange. We won the auction process and signed an agreement to acquire LCH SA subject to the completion of the merger between Deutsche Boerse and the London Stock Exchange. For various reasons, this merger never completed so we were never in a position to acquire LCH SA."

Boujnah continued: “At that moment, Euronext entered into a partnership agreement with LCH SA to renew the existing relationship for the clearing of Euronext flows for 10 years until 2027.”

Commenting on Euronext’s relationship with LCH, the chief executive said: “This partnership is very structured and has many features including a profit-sharing agreement on Euronext derivative flows cleared by LCH SA, and a pre-emption right in the event that LCH would want to sell LCH SA. Euronext also has an 11.1% stake in LCH SA. It is a structured, long-term relationship.”

But Boujnah is now thinking about an alternative arrangement.

“Two things have changed in recent months. First, there is the debate about clearing and specifically where it is located, above and beyond the debate about interest rate swaps. Second, Euronext acquired Borsa Italiana group and today we own 100% of CC&G. So, it is true that we are exploring the possibilities of migrating the Euronext flows to CC&G as an alternative to the client-supplier relationship we have today with LCH SA.”

Boujnah added: “Euronext used to own its own clearing house, but since 2004 we have had a supplier-client relationship with LCH SA, so here we have an opportunity to consider internalising the Euronext flows.”

The Euronext chief admits this is not a “business-as-usual” type decision and any determination will have to be taken in the context of all the other initiatives already listed by Boujnah.

“We are exploring what all those factors mean in terms of recurring operational expenses, capital expenses and revenues for the group. We are factoring in the financial benefits and parameters, the strategic parameters, the industrial parameters and the operational parameters. We are in the process of making that analysis.

“We also need to factor in the timing of the implementation of such a decision as we have also to implement the migration of the Core Data Centre.”

He continued: “As with the data centre migration, this is a strategic decision and these types of decisions are not frequent so we will make a decision as soon as we are ready, though the sooner the better.

“We are working on all alternatives in an agnostic manner but, from a strategic point-of-view, it would make sense to be like many other exchanges of decent size and be able to re-internalise clearing, which has been historically one of the main strategic priorities for the group.”