With the regulator mandating central clearing for OTC trades, the gloves are off as clearinghouses jockey for position to capture an increasing share of what is likely to be a profitable business going forward. As guest writer Tony Freeman of Omgeo points out, jobs in the clearing business are becoming as well paid as trading positions in investment banks - that's how competitive it is becoming.

This week the London Stock Exchange (LSE) made its intentions clear when CEO Xavier Rolet, resigned from the Board of LCH.Clearnet. Although the LSE never had an equity stake in LCH.Clearnet, it occupied a seat on the 16 member board, which comprises members of exchanges and banks that use the clearinghouse. Unlike other European exchanges such as  Deutsche Börse, the LSE does not have its own post-trade clearing business and the general belief is that it will now go off and build its own, which some say is is a necessity if it wants to build market share in the pan-European derivatives business.

"It has been clear for some time that the LSE sees clearing as a future profit centre rather than a cost. Only a quick scrutiny at the P & L of Deutsche Börse shows the value of a CCP as an addendum to a trading platform," remarked John Gubert, independent consultant and contributor to financial-i magazine. In its half-yearly results published in Q2, Eurex, the clearing arm of the German exchange was the strongest performing business in terms of sales revenues (EUR 246.1 million) in Q2 2010 compared to EUR 191.9 million for its depository business, Clearstream.

Gubert says the future of LCH.Clearnet as an independent must be in doubt as it appears to have a weakening link into some of its key clients. "The move to more vertical infrastructures makes the need for interoperability ever more important so that we avoid "captive" clients being forced to pay excessively by monopoly suppliers."