The clearing houses of the London Stock Exchange and Deutsche Börse are already too big to fail, says Fidessa’s Steve Grob, regardless of plans for the exchange giants to merge their operations.

Grob, director of group strategy at the trading technology specialist, says talk about how the planned tie-up of both bourses might create a “too big to fail” clearing house is missing the point.

“Both LCH.Clearnet and Eurex Clearing are already too big to fail,” he said in a blog post on Thursday.

“Imagine the fallout if either of these were to go through some sort of disorderly meltdown – would the UK or German governments really just sit back and watch?”

Grob says the real point is that as a “buyer or seller of last resort” clearing houses are, by definition, too big or important to be allowed to fail.

“The sole reason for their existence is to provide confidence to the financial system just like the UK’s ATOL does by underwriting travel firms in the time between us paying for our holidays and actually going on them.”

Deutsche Bourse’s Eurex clearing house serves more than 180 members in 17 countries, managing a collateral pool of €67bn and processing a gross risk valued at almost €18trn every month.

In the first half of 2015, it cleared around 870 million derivatives contracts, nearly half of which were traded off-book.

LCH.Clearnet, owned by the LSE, clears swaps, equity settlement, energy, bonds and repo, and futures.

SwapClear alone, the firm’s interest rate derivatives clearing service, cleared 678,000 trades in 2015, a 67% rise on the previous year, and increased its membership to 116.

Both Eurex and LCH.Clearnet act as central counterparties, or CCPs, which sit between a buyer and a seller in a trade as a way of preventing systemic risk. 

However, given their increasing importance post financial crisis, there have been concerns that CCPs themselves could be the root cause of another financial meltdown.

Manmohan Singh of the IMF, for example, has been one of the most high profile central bankers to express concerns about the risks implicit in the modern CCP model. 

If things really did go 'pear-shaped', then Fidessa's Grob says the clearing houses would have to be kept upright however many or few of them existed.

It’s no wonder then, he says, that there’s so much chatter around distributed ledger technology, known as blockchain.

Although Grob argues that imagining a solution and practically implementing it everywhere, for every asset class, are two completely different things.