LCH.Clearnet Limited and SIX x-clear Ltd have announced the publication of a summary link agreement which provides the frame work for successful interoperability across Europe.

The clearing house and the licensed Swiss bank, which is also the Central Counterparty, agreed on the model after the prototype successfully withstood the Lehman default.

Key features of the model, which has been designed to minimize risk by safeguarding the assets of the non-defaulting CCP, include retaining the authority to determine the eligibility of trades for clearing, and a margining process which preserves the integrity of each CCP.

Of the announcement, Wayne Eagle, the director of equity services for LCH.Clearnet said: “LCH.Clearnet and SIX x-clear have a proven model that has withstood the largest default in history.  It demonstrates that interoperability can be safe and secure so long as the structure preserves the integrity of the CCPs and minimizes contagion in the event of a default through securely ring-fencing the surviving CCP and its members.”

 Urs Wieland, a member of the executive committee and head of risk management at SIX x-clear  went on to add: "SIX x-clear and LCH.Clearnet understand and support the market's need for transparency. By publishing all major contents of our inter-CCP contract, SIX x-clear and LCH.Clearnet remain committed to championing the needs of our clients by providing safe, secure and transparent interoperable CCP links. CCPs should never compete on risk and when interoperability is implemented correctly, risk is not compromised. The introduction of competitive clearing for UK equities on the LSE caused no market disruption and showed the true benefits of the system – move to your favored clearer immediately or simply stay with the incumbent, all the while experiencing no disruption”.