Clearing and settlement
Members of the London Stock Exchange benefit from an efficient clearing and settlement infrastructure across its domestic and international markets.
Our relationship with LCH.Clearnet, x-clear and Euroclear UK and Ireland ensure that trades in UK and Irish securities are cleared and settled quickly and cost effectively. The process allows members to take advantage of the efficiency and cost benefits provided by a Central Counterparty (CCP) and settlement netting.
The CCP for the Exchange's electronic order book, SETS, was introduced in February 2001, in conjunction with CRESTCo (now Euroclear UK and Ireland) and the London Clearing House (now LCH.Clearnet Ltd).
The CCP service was enhanced on 1 July 2002 to include optional settlement netting. This allowed participants to have just one net settlement per security per day with LCH.Clearnet Ltd, irrespective of the number of trades they had dealt on SETS.
Choice of CCP was introduced on 12 December 2008 with SIX x-clear operating alongside LCH.Clearnet.
Clearing
To clear trades through LCH.Clearnet Ltd or x-clear, member firms must establish either an indirect or a direct clearing relationship:
An indirect relationship is when non-clearing Members (NCMs), establish relationships with General Clearing Members who clear their business on their behalf. View list of accredited GCMs who provide services to the market.
A direct relationship is when a firm is also a member of LCH.Clearnet and has a direct relationship either as:
- a General Clearing Member (GCM) is able to clear its own trades, trades executed by its customers and trades executed by other member firms (NCMs)
- an Individual Clearing Member (ICM) can only clear trades executed by itself or its customers, not other member firms (NCMs).
A GCM or an ICM cannot self-clear agency business. Such a firm will be required to have an agreement in place with a third party GCM.
Further information on clearing and central counterparty initiatives currently underway.
Settlement
UK security trades are normally settled in Euroclear UK and Ireland, the UK’s central security depository, but it is also possible to settle these trades in Euroclear Bank. Euroclear UK and Ireland also provides depository interest securities for a wide range of international securities. These instruments allow UK investors the ability to invest in foreign securities within the Euroclear UK and Ireland service.
Settlement of trades in the ‘wholesale’ international markets operated by the Exchange, such as the International Order Book, are settled by member firms in the home depository of the security in question (either DTCC or Euroclear Bank).
A member firm may act as, or use the services of, a settlement agent to settle on-Exchange business. Alternatively, a member firm may use the services of a model B firm and a list of all accredited model B providers can be found here.
A firm admitted to membership of the London Stock Exchange may request the enforced purchase of securities on behalf of another Exchange member in order to facilitate the settlement of a transaction executed on Exchange. Information on the buying-in-process.