The cost of clearing in Europe is likely to fall over the next year as clearing houses look set to accept calls for price tariff reform from investment banks.

Europe's sellside institutions have long complained about the cost of post-trade services but their frustration reached new levels last week after LCH.Clearnet, the clearing house they majority own, announced pre-tax profits up more than three times, from €20.2m ($25.9m) last year to €72.2m ($92.5m) in the six months to June. Euronext owns a minority share in LCH.Clearnet, which recently appointed Roger Liddell as its chief executive and replacement to long-serving boss David Hardy. The exchange collected a retrocession fee of €16.4m ($21m), an increase of 108% on the sum collected for the same period last year, but its investment banking shareholders received nothing. A spokesman for LCH.Clearnet said: "We have not paid a dividend to ordinary shareholders since the merger as the profits made were required to service our obligations to the preference shares held by Euronext. These obligations have to be met first." The clearing house has not committed to rebates for investment banks nor any changes to its fee tariffs. "While we have enjoyed a strong performance in the first half of this year, any decision on dividends would be for the board to consider in light of the full-year results at the end of December," the spokesman said. LCH.Clearnet stated its intention to clear its debt to Euronext as early as possible with a view to focusing on its other shareholders. The spokesman said: "Early redemption of the preference shares would affect our reserving requirements, which could be to the benefit of our shareholders." Fee reductions are not out of the question. One banker said investment banks would prefer a change to fee structures. "Rebates are one-off events and the money is never paid back to the operational function that gave the money up in the first place. On balance, we'd prefer a reduction in tariffs as once the fees go down, it is always going be hard to put them up again," he said. Any move by LCH.Clearnet to placate its investment banking owners would be timely. A banker at one of Europe's largest sellside houses said: "Electronic trading has driven bargain size down and the proportion of fees to the overall cost up. Tariffs are high relative to the US but on an absolute basis they feel wrong and a change needs to happen." He urged clearing providers to slash their costs. He said: "They could reduce their headline costs or introduce incentives for new business such as volume discounts. I expect LCH.Clearnet will move to introduce tariff reductions but we would like to see the same from Eurex for cash and derivatives."