How It Works - LCH.Clearnet Ltd
Overview
All matched Euronext.liffe London transactions are processed and ‘presented’ through TRS/CPS (Trade Registration System/Clearing Processing System) to LCH.Clearnet Limited. Registration of matched transactions presented to LCH.Clearnet does not occur on a continuous basis during the day, but occurs one hour after TRS’s end of day signal is sent to LCH.Clearnet.
Novation
When LCH.Clearnet has accepted a contract for registration it is replaced, by novation, with two new, separate contracts involving LCH.Clearnet as both buyer and seller respectively. It is the latter contracts that remain on the register. As soon as novation occurs, the original contracting parties no longer have a contractual relationship with each other. Each now has a contract with LCH.Clearnet.
LCH.Clearnet’s obligations as central counterparty continue until final settlement as defined in the contractual terms of each contract. There are two types of settlement.
- Cash settlement organised by LCH.Clearnet (most financial futures and options on futures)
- Delivery versus payment organised by LCH.Clearnet (physical-deliverable commodity futures and options on futures)