Market watchers have for some time stressed the growing importance of clearing as a revenue stream for exchange groups. This was hammered home when Gregor Pottmeyer, chief financial officer-elect of the NYSE Euronext and Deutsche Börse merged group, outlined his financial expectations for the landmark deal.

According to his estimates, the merged group expects to achieve cost synergies of €300m a year after three years, with 23% of these overall cost savings to be achieved in the clearing business, he told analysts and journalists during an investor call. But cost savings are only half the story. Pottmeyer also said he expected the new group to make "roughly" 50% of its outlined €100m new revenue synergies from clearing too. According to Justin Schack, managing director in market structure analysis at New York brokerage Rosenblatt Securities, the cost savings look realistic. The deal will provide NYSE Euronext with a fully fledged clearing house in the form of Deutsche Börse's Eurex Clearing, meaning the exchange can abandon costly plans to build twin clearing houses in London and Paris. By pushing NYSE Euronext's Liffe business through Eurex Clearing, the exchange group will also generate an extra income stream for itself through clearing fees historically paid to NYSE Euronext's former clearing provider, LCH.Clearnet. Schack said: "The combined group not only saves the investment on the clearing houses, but can also collect fees on that business that it now gives up to LCH.Clearnet." Although Pottmeyer identified an opportunity to internalise fee-based revenue historically diverted to LCH.Clearnet, he was less vocal on where the real money would be made: through the interest made on the assets pledged as collateral against transactions cleared through Eurex. Will Rhode, a research analyst at Tabb Group, said: "The principal opportunities for the new group result from the standardisation of derivatives trading through the exchange and the collateral-based revenues the group can make through clearing." The collateral margin business is big and getting bigger. According to its annual accounts, in 2009 LCH.Clearnet Group earned 41% of its revenues not from fees associated with the clearing service, but from interest made on cash and collateral margins posted to the clearing house. It made a further 2% of revenues from interest on its default fund. With the global regulatory push to force over-the-counter derivatives through clearing houses, analysts reckon there will be $2 trillion of collateral assets up for grabs on which clearing houses can make a tidy income. The NYSE Euronext Deutsche Börse deal is largely predicated on the new group's capacity to dominate the booming market in derivatives trading and to pass that trade flow through to Eurex Clearing, which will then sit on hundreds of billions of dollars worth of collateral assets. This makes preserving Deutsche Börse's streamlined or captive trading and clearing model, in which firms trading on the exchange have no choice but to clear through the exchange-owned clearer, more important than ever. But regulatory shifts at a European level could threaten to disrupt this model by forcing Deutsche Börse to open its clearing house to other trading venues and to allow firms trading on its exchange to clear elsewhere. For this reason, the European debate on clearing competition, already a political hot potato, is set to get hotter.