London Stock Exchange Group Plc · LSE:LSEG
London Stock Exchange — Investor Presentation (October 2024)
35 slides from London Stock Exchange's investor presentation, Oct 1, 2024
Slide 1: Post Trade Investor webinar
Post Trade Investor webinar Daniel Maguire | Isabelle Girolami 1st October 2024
Slide 2: Agenda
Agenda Post Trade overview Clearing and market drivers LSEG Post Trade in detail
Slide 3: Post Trade overview
Post Trade overview
Slide 4: What is a Central Counterparty and why would you use it?
What is a Central Counterparty and why would you use it? What does a Central What are the Bilateral Counterparty (CCP) do? main benefits? A CCP stands between the parties Reduction in counterparty in a trade - buyer to every seller and the seller to every buyer credit risk - guaranteeing the trade i
Slide 5: LCH – A global clearing house
LCH – A global clearing house We offer clearing and trade management services for a diverse range of asset classes Clearing for: Other services Interest Foreign Credit Listed Digital Post Trade Regulatory Repos Equities rate swaps Exchange default swaps rates assets Solutions Reporting We partner wi
Slide 6: We are the markets' partner for post trade and financial resource management
We are the markets’ partner for post trade and financial resource management Core Financial Post Trade Market Infrastructure Solutions (PTS) Clearing Brings together highly complementary post trade services that supports trade processing, margining, settlement, optimisation and risk management - Cou
Slide 7: We operate systemically critical market infrastructure
We operate systemically critical market infrastructure Clients Regulators, Policy Makers, Clearing brokers Central Bank Press Members Market Industry trade Infrastructure groups providers Exchanges/ Multilateral Trading Facilities* *On an open access basis 7
Slide 8: Post Trade's offering is global and multi-asset class
Post Trade’s offering is global and multi-asset class, and we are increasingly collaborating across the Group Capital Formation Pre-Trade & Trade Post-Trade & & Issuance Liquidity Discovery Execution Capital Optimisation Data & Analytics Data & Analytics Data & Analytics Data & Analytics Capital Mar
Slide 9: Clearing and market drivers
Clearing and market drivers
Slide 10: An ever-changing regulatory environment is pushing market participants to seek greater capital efficiency
An ever-changing regulatory environment is pushing market participants to seek greater capital efficiency 2008 2024 Global G20 Dodd-Frank EMIR Reg, MiFiR/MiFiD Basel II/III Uncleared Brexit – Global Capital Market events Financial Commitments Reg. Reform Reform Margin Rules Proposed reforms – & regu
Slide 11: Stability & resilience – protecting our members while optimising their capital needs
Stability & resilience – protecting our members while optimising their capital needs We have a strong track record… …and a robust default management process Very strong operational resiliency and service availability ‘Defaulter pays’ model: defaulter’s margin and Default 1 Funds used prior to the us
Slide 12: We are experienced at managing significant market events
We are experienced at managing significant market events 2008 2020 2022-23 Lehman Brothers Clearing Covid LIBOR Transition Member Default Continued to clear new business LCH cleared markets were LCH assumed leading role in and existing margin cleared subjected to major deleveraging transitioning ove
Slide 13: Key market drivers
Key market drivers Market trends Policy Innovation Economic activity/sophistication Governmental mandates / regulation New products - Increasing debt issuance in mature - Mandated Clearing e.g. UST Clearing - Attracting existing bilateral flow into a markets raises demand for repos - Regulatory Upda
Slide 14: LSEG Post Trade in detail
LSEG Post Trade in detail
Slide 15: A differentiated service through deep industry expertise and a partnership model
A differentiated service through deep industry expertise and a partnership model Deep customer Strong governance Value to alignment and commercial model clients Large customer base User representation Benefits of scale (liquidity & transactional) Significant network effects Independent Boards, regul
Slide 16: We've adapted to meet our customers' evolving needs
We’ve adapted to meet our customers’ evolving needs 2008 2024 While market events were changing the clearing landscape… Global Financial Crisis G20 Commitments EMIR Reg, Reform Basel II/III Brexit: Location Policy - Bear Stearns Collapse Dodd-Frank Reg. Reform MiFiR/MiFiD Uncleared Margin Global Cap
Slide 17: Our economic model
Our economic model Revenue Our cost base Collateral Recurring Profit share - Customers post collateral to - Members enjoy an “all you - A group of founding members receive cover margins: either cash can eat” clearing model for a minority share of LCH profits or non-cash assets the following: - Fixed
Slide 18: SwapClear – the global leader in OTC interest rate swaps clearing
SwapClear – the global leader in OTC interest rate swaps clearing SwapClear is the largest OTC interest rate swap clearing service Unrivalled liquidity by gross notional cleared SwapClear clears 95 percent of all “vanilla” OTC interest rate swap products, in 27 currencies Broad product coverage and
Slide 19: SwapClear – consistent growth over the long term
SwapClear – consistent growth over the long term Registered flow by year Outstanding volumes at year-end 2,000 12 600 7 10 500 6 1,600 Notional Registered ($trn) Notional Outstanding ($trn) Trades Outstanding (mm) Trades Registered (mm) 5 8 400 1,200 4 6 300 800 3 4 200 2 400 2 100 1 0 0 0 0 2014 20
Slide 20: ForexClear – a significant market opportunity
ForexClear – a significant market opportunity Foreign exchange markets are shifting to Currently, only 7% of the FX transactions (NDFs and FX Options) fall under regulation that incentivises clearing. But this is changing… a cleared environment - UMR incentivises NDF and options clearing - SA-CCR is
Slide 21: ForexClear – a rapidly-growing business
ForexClear – a rapidly-growing business ForexClear cleared ADV ForexClear initial margin Total ForexClear participants Cleared Cleared 12 140 Notional Trade Count 10 120 $160bn 30,000 $140bn 100 25,000 8 $120bn Total ($bn) 80 20,000 $100bn 6 $80bn 15,000 60 4 $60bn 40 10,000 $40bn 2 20 5,000 $20bn $
Slide 22: RepoClear – the world's largest liquidity pool
RepoClear – the world’s largest liquidity pool Weekly sovereign bond issuance by issuer1 Total yearly nominal (€tn) 350 300 250 200 150 100 50 0 ~€77tn Nominal Cleared across euro debt and gilts, >€1.2tn Daily nominal cleared across euro debt and gilts 3.9tn Cash bond nominal cleared, up 86% vs Q2 2
Slide 23: CDSClear and EquityClear - well-established market positions
CDSClear and EquityClear - well-established market positions CDSClear EquityClear OTC Derivatives Securities & Reporting LCH SA’s global Credit LCH Ltd’s pan-European clearing Derivatives clearing service for equities and ETFs - Strong growth in EU credit clearing; competitor - Post Euronext exit, e
Slide 24: The uncleared segment also represents a significant opportunity
The uncleared segment also represents a significant opportunity Almost half of OTC derivatives trading remains The interest rate OTC derivatives segment is by uncleared far the most mature in using CCPs Uncleared % Gross Value Interestrate Interest rate contracts 27.5% $12.8trn contracts ForeignFore
Slide 25: Post Trade Solutions – removing inefficiencies by addressing industry pain points
Post Trade Solutions – removing inefficiencies by addressing industry pain points Industry tailwinds shaping post trade Increased regulatory focus is driving up cost which will compel firms to be more efficient The industry tailwinds Capability of technology is changing dramatically with long-term i
Slide 26: Our vision
Our vision PTS infrastructure PTS LCH Post Trade Clearing Trading These service lines work with existing cleared infrastructure to bring the benefits Trade Matching & Affirmation of clearing to currently uncleared trades and to consolidate processing across Traditional “Cleared” cleared and bilatera
Slide 27: FX Smart Clearing is one example of the many use cases for Post Trade Solutions
FX Smart Clearing is one example of the many use cases for Post Trade Solutions Example FX Smart Clearing workflow: Risk Positions Illustrative Risk Weights Illustrative A bank has three EURUSD positions -67% -95% 1 - against Bank A, Bank B and Bank C For capital calculations under SA-CCR, the gross
Slide 28: Partnering across LSEG
Partnering across LSEG Data & Capital Customer Analytics Markets advocacy Fundamental review of NDF Matching & ForexClear Building strong partnerships the trading book Development of a fully cleared Post Trade’s partnership model LCH trade data used to help Non-Deliverable Forwards (NDF) fosters dee
Slide 29: Further growth opportunities
Further growth opportunities APAC FMX CDS Digital asset expansion clearing clearing pursuing business in delivery of US futures extending existing EU launch of crypto China, Japan, Korea, clearing service with FMX footprint and expanding derivatives clearing India, Singapore, Hong customer network i
Slide 30: In summary
In summary Global multi-asset class Deep, expanding partnerships franchise; strongly with leading financial positioned institutions Continuous investment in Leveraging capabilities new products and markets and expertise across driving sustainable growth the Group 30
Slide 31: Appendix
Appendix
Slide 32: Glossary
Glossary Back Office The part of a firm that is responsible for post-trade activities Bilateral Agreement The transfer between counterparties to a non-cleared over-the-counter derivatives contract Clearing The process of establishing settlement positions and checking that securities and/or cash are
Slide 33: Glossary
Glossary FX Forward An agreement between two parties to buy or sell currency at a specified price on a predefined expiry date Initial margin Returnable deposit paid to the clearing house by the counterparty when entering a cleared market transaction; it is the calculated, worst-case loss on a contra
Slide 34: Financial Reporting
Financial Reporting OTC Derivatives Securities & Reporting Interest rate swaps Repos Non-cash Net treasury Foreign exchange collateral income Equities Credit default swaps Digital assets Listed rates Post Trade Solutions Regulatory Reporting 34
Slide 35: Contacts and further information
Contacts and further information Peregrine Riviere London Stock Exchange Group plc Group Head of Investor Relations 10 Paternoster Square Tel: +44 (0)7 977 379 063 | Email: peregrine.riviere@lseg.com London EC4M 7LS Chris Turner Investor Relations Senior Director Tel: +44 (0)7 769 931 614 | Email: c
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