Clearing and settlement

Trade processing

We classify financial instruments in several trading groups according to the type of product, their currency, liquidity, and several other characteristics.

Each security can be traded only in one channel at a time (‘bilateral’, ‘pass-through’ or ‘guaranteed’), according to its trading classification. However, we may move a security from ‘pass-through’ to ‘guaranteed’ classification if its liquidity changes or on a market-maker’s request.

For more information check the appendix to our trading manual

LCH.Clearnet SA operates as a central counterparty (CCP) and therefore ensures that trades are cleared rapidly and cost-effectively. The novation process – the interposition of the CCP between buyers and sellers – allows members to profit from post-trade anonymity, netting and counterparty risk protection, leading to an improved liquidity and price formation.

LCH.Clearnet SA carries out its activities via indirect and direct relationships with members of LuxSE:

• Indirect relationship: Members of LuxSE may choose to operate as Non-Clearing Members (NCM) of LCH.Clearnet SA. The agreement is signed with a General Clearing Member firm (GCM) who clears trades on their behalf.
• Direct relationship: Another option is to operate via a direct relationship with LCH.Clearnet SA. LuxSE members can opt to become either a General Clearing Member (GCM) or an Individual Clearing Member (ICM); the difference being, GCMs may clear their own trades and trades executed by NCMs, while ICMs can only clear their own trades.

The difference: GCMs may clear their own trades and trades executed by NCMs while ICMs can only clear their own trades.