LCH.Clearnet and SIX x-clear have published a summary link agreement which provides the framework for successful interoperability across Europe. The existing interoperability arrangement between the clearing houses which serves the London Stock Exchange and SIX Swiss Exchange uses this link agreement.

The agreement is based upon a model which withstood the Lehman default. The model has been designed to minimise the risk of contagion by safeguarding the assets of the non-defaulting CCP and its members.

Features include:

• Integrity of risk management:
  • Each CCP retains the authority to determine the eligibility of trades for clearing
  • Margining process preserves the integrity and safeguards of each CCP
• Protection from contagion in the event of a default:
  • ‘Defaulter pays' model ensures protection for non-defaulting CCP and its members
  • Distinct default funds minimises contagion in the event of a CCP default

Wayne Eagle, director of equity services at 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 minimises contagion in the event of a default through securely ring-fencing the surviving CCP and its members."