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Spain throws down a vertical challenge

The arrival of a new clearing house in Spain challenges the balance of power in Europe. Can it succeed against competitors such as LCH.Clearnet that are pushing for a horizontal solution?

JUST WEEKS AFTER the London Clearing House and Clearnet announced their merger and celebrated their contribution towards a pan-European securities infrastructure, Spanish securities trading group Meff revealed details of a plan to set up a rival European clearing network.

It is rejecting the trend towards horizontal ownership in securities trading and processing and, in the words of one banker, "doing a Germany" by setting up a vertical structure. Critics say this is yet another example of Spanish protectionism. Supporters say it will enhance Spanish debt's liquidity. Either way, it could provide interesting competition.

It was known for months that such an announcement was on its way. The establishment of a new clearing entity in Spain required a change in the country's law, which was passed in November 2002. And the Meff Group was authorized to provide this new service in June 2003.

Long on ambition But what the announcement lacked in surprise, the details make up for in ambition. Meffclear started on September 18 by clearing the repo traded on the Senaf electronic platform for Spanish government debt.

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