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The London Stock Exchange has privately outlined a series of measures to a group of its largest customers that are aimed at helping them cut the expense of trading shares without attacking the exchange’s own tariff structure.
The plans mostly centre on the key post-trade service of clearing. This, in effect, means all purchases of a stock would be offset against the sales of the same stock, so that the number of transactions sent for clearing would be radically reduced. Banks are charged per bargain cleared.
Currently, trades conducted on the LSE are cleared through LCH. Clearnet. The LSE has had long-standing plans to offer customers a choice of clearer by making available the services of SIS x-clear, which is part of the Swiss stock exchange. But a new code of conduct brokered by the European Commission this year is aimed at prompting all European exchanges, clearers and settlement houses to offer customers what is described as interoperability.
This allows customers to pick and choose among post-trade service providers, a move expected to lead to fierce competition on price and service. LCH.Clearnet has slashed clearing tariffs over the past year. However, the move by the LSE would give banks the incentive to move clearing away from LCH. Clearnet, possibly achieving lower post-trade costs.
The LSE also outlined plans at a meeting this month with members of the London Investment Banking Association to make it easier for banks to buy and sell “contracts for differences”, a derivative tool, with the shares that underline them.
The meeting was one of several in recent weeks in which the LSE has been seeking to reach out to its largest customers, rebuilding what have been seen as chilly relations following years of fending off hostile bids.