* LCH.Clearnet tripled fees for LME trades on June 1
* LMEClear aims to clear OTC, gold and silver products
LONDON, June 26 (Reuters) - The London Metal Exchange (LME)
expects its in-house clearer LMEClear will charge members fees
similar to provider LCH.Clearnet's just-tripled charges for
clearing LME trades.
Brokers will pass these LME charges on to clients next year
because rules - brought in to stop trading practices seen as
contributing to the 2008 global financial crisis - mean they
will no longer be allowed to net client positions within their
LCH.Clearnet tripled fees for clearing LME trades to 15
pence per lot from 5p as of June 1.
"It's still far too early to say, but by early summer next
year, we'll know where we'll set the tarriffs, and I don't think
they'll be higher than current rates," said Trevor Spanner, LME
managing director of post trade services, who is in charge of
setting up LMEClear.
The LME, the world's No. 1 metals marketplace, was bought
late last year by Hong Kong Exchanges and Clearing (HKEx)
for $2.2 billion. HKEx is under pressure to show a
return on its acquisition, and is eyeing LMEClear for returns.
Spanner hopes LMEClear will quickly expand its clearing
services to commodities such as gold and silver and eventually
to over-the-counter (OTC) metals products.
"There's a sizeable business at the moment that members do
OTC, and it's going to get much more expensive to do that with
new regulations. We're looking at designing (OTC) contracts that
could at some point give members the option to route them into
LMEClear for clearing," he said.
One new EU regulation, European Markets Infrastructure
Regulation (EMIR), aims to increase transparency in OTC markets.
The OTC market for contracts such as swaps is worth an
estimated $600 trillion globally. It was widely implicated in
the 2008 when the credit default swap (CDS) market imploded.
"There's costs involved with complying with EMIR. No one
should be surprised that increased regulations brings
increased overheads. But for us, I think the opportunities
outweigh the costs," Spanner said.
Clearing houses act as intermediaries between parties to a
trade to reduce the risk of one (or more) parties defaulting.