Borsa Italiana settlement technology acquisition could add revenue to London Stock Exchange

Last year's £1.63bn acquisition of Borsa Italiana by the London Stock Exchange gives it a clearing and settlement platform that will allow it to offer clearing services directly for UK trades for the first time.

Last year's £1.63bn acquisition of Borsa Italiana by the London Stock Exchange gives it a clearing and settlement platform that will allow it to offer clearing services directly for UK trades for the first time.

The London Stock Exchange plans to transfer trading from Borsa Italiana to its own Tradelect platform in September. Tradelect will send these trades to the clearing and settlement platform, ensuring the seller is paid and the stock is transferred to the buyer.

The move could pave the way for the the London Stock Exchange to provide similar in-house clearing service for UK share deals. The London Stock Exchange currently subcontracts its clearing to LCH.Clearnet.

The Financial Services Authority set a precedent that the London Stock Exchange could follow last month when it give approval for IntercontinentalExchange to run its own clearing system in London.

A spokesperson for the London Stock Exchange said the firm is "exploring the whole clearing issue in depth, taking into account the recent changes in the landscape".

"Our priority will be to build on our record of driving savings for the market in post-trade services. Whatever we decide, we have very efficient [clearing] assets [with Borsa Italiana], which provide excellent value in the Italian market, and we value the additional strategic flexibility that this gives us," the London Stock Exchange said.

Bob Mcdowall, an analyst at TowerGroup, there are no firm plans for the London Stock Exchange to start clearing its own share trades. But he said increased competition from new trading venues is making exchanges look for additional business.

"Exchanges are looking for new sources of revenue because they have to compete with new venues and the clearing and settlement technology of Borsa Italiana could give the London Stock Exchange an opportunity to expand and develop clearing services across the combined company," he said.

The London Stock Exchange is facing new competition. Trading platforms Turquoise, Bats Trading and Nasdaq OMX exchange each plan to launch pan-European share trading systems in September.

The Borsa Italiana clearing business contributed £37.4m in revenues to the London Stock Exchange in the past 12 months.

This could increase significantly if the clearing of trades completed in London go through the system.

The London Stock Exchange would have to get approval for creating its own clearing service from the Office of Fair Trading because of competition issues and the treasury as well as the Financial Services Authority.




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