UPDATE 1-LME considers forming own clearing house

LONDON Tue May 3, 2011 9:23am EDT

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LONDON May 3 (Reuters) - The London Metal Exchange is considering building its own clearing system to boost earnings, it said on Tuesday, but European clearing house LCH.Clearnet said it was still best placed to serve the market.

"The LME is giving serious consideration to the possibility of building its own clearing house... we have reached the point at which deeper examination of the issues requires some discussion in the public arena," the LME said in a notice to members.

"We believe self-clearing would also be accretive to earnings at the LME," it added.

Its 2009 financial statements, the latest available, show the LME posted a profit of 13.56 million pounds ($21.8 million) and revenue of 43.59 million pounds.

Last year, when metals prices rose strongly, 120.3 million lots were traded on the LME at a total notional value of $11.6 trillion, up by around 60 percent from the year before.

European clearing house LCH.Clearnet said that it had a long relationship with the LME, and also a long relationship with LME market participants, for whom it remained the top choice for clearing.

"LCH.Clearnet has not received notice from the LME or indeed any indication regarding the likely timeframe," it said in a news release.

"Market participants tell us they are looking for proven, efficient and consolidated clearing offerings. LCH.Clearnet is best placed to continue to deliver this."

(Reporting by Melanie Burton; editing by Jason Neely)

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