LONDON Pan-European bourse Euronext (ENX.PA) said on Monday it would use a Dutch unit of the Intercontinental Exchange (ICE.N) to process its derivatives transactions after the failure of its bid to buy the clearing house that now handles Euronext deals.
Euronext, which operates exchanges in Paris, Amsterdam, Lisbon and Brussels, currently uses LCH SA, the Paris-based clearing unit of the London Stock Exchange Group (LSE.L), which it wanted to buy for 510 million euros ($544 million).
After the LSE's planned merger with Deutsche Boerse (DB1Gn.DE) was vetoed by European Union competition officials last week, the LSE canceled the clearing unit sale.
Clearing houses ensure a transaction is completed even if one side of a trade goes bust. Reforms since the 2007-2009 financial crisis require derivatives to be cleared to improve market transparency and safety. This will boost volumes needing to be cleared, making it more attractive as a business.
With Euronext's contract with LCH expiring at the end of 2018, the bourse operator had to find an alternative. On Monday it said it was signing a 10-year deal with ICE Clear Netherlands to clear its derivatives and commodities contracts from the second half of 2018.
After another failed exchange merger, Europe's bourses are keen to show they can thrive alone amid speculation that Asian or U.S. exchanges may be interested in bidding for them.
Responding to Euronext's announcement, LSE described Euronext's derivatives clearing business as "immaterial", at less than 1 percent of the LSE's adjusted operating profit.
"LCH SA is a strong business accounting for a significant proportion of all European repo clearing and European cash bond clearing," the LSE said in a statement.
Euronext said it would invest 10 million euros in ICE Clear and said headline clearing fees would be cut by 15 percent.
"This represents a long term, open access, sustainable and innovative euro zone based clearing proposition for Euronext and its customers," the Paris-headquartered bourse said.
Euronext had already begun offering customers the ability to clear their stock trades on EuroCCP, in which the exchange bought a 20 percent stake, as an alternative to LCH.
The LSE said on Monday it would open a connection to enable LCH in Paris to clear share trades executed by Turquoise, a pan-European platform owned by the London bourse and which competes in trading shares listed on Euronext.
The LSE said the connection has the potential to "pass on significant cost savings and efficiencies to investors in French, Dutch, Belgian, Portuguese and a range of other European securities".
(Editing by Susan Thomas and Edmund Blair)