The Risk Controllers: Central Counterparty Clearing in Globalised Financial Markets

11

Users and Clearers

11.1 USER-GOVERNED CCPs IN THE UK AND US

In continental Europe the coming of the euro and the strategic ambitions of exchanges and their leaders were ‘top down’ factors behind the emergence of Clearnet and Eurex.

For the UK and the US, the users of CCPs constituted a ‘bottom up’ constituency that helped shape clearing developments in the final decade of the 20th century.

Despite differences in governance and ownership structures, the three clearing houses that served derivatives traders in Britain and the equities and options markets in the US had more in common with each other than with the new CCPs in continental Europe or with most CCPs clearing US derivatives markets. The member-owned Board of Trade Clearing Corporation (BOTCC) in Chicago was an exception to this rule and its story is covered in detail in Chapter 13.

The similarities grew more pronounced after Britain's ICCH temporarily abandoned its international ambitions and, as the London Clearing House (LCH), was restructured as a mainly user-owned company in 1996.

By the end of the 1990s, users influenced the governance of LCH in the UK and the National Securities Clearing Corporation (NSCC) and Options Clearing Corporation (OCC) in the US. All three CCPs were horizontal structures, clearing for more than one trading platform. And all three operated business models that were less than totally profit-oriented. Although LCH's policies on profit varied later, NSCC and OCC provided their clearing services ...