LCH’s decision to close its clearing service for freight came at a time that the traditional clearer found it difficult to compete against other big names, according to sources.

London’s biggest freight clearer struck a deal last week to novate open positions in the dry bulk freight FFA and option contracts to expanding EEX Group.

A source told TradeWinds: “They cannot compete because they have the wrong regulatory setup.

“But they tried a number of times to improve.

“They tried iron ore, they tried steel but it didn’t work, they had no success.”

When asked about the reason behind the latest decision, a spokesperson for LCH told TradeWinds: “We have completed a strategic review and concluded that we can no longer offer members compelling benefits in the freight market.

“We will continue to work with our members to make the closure as smooth as possible, and would like to thank them for their support over the years.”

The Singapore Stock Exchange (SGX), one of LCH’s main competitors, said earlier today that it will waive clearing fees for all FFA trades that are to be transferred from LCH from 5 July to 31 December.

LCH’s departure came after a failed merger between the London Stock Exchange (LSE) and Deutsche Borse earlier this year.

LSE controls LCH while the German stock exchange owns EEX.

The £21bn merger between London and Frankfurt was blocked by the European Competition Authority (ECA).

But the closure of LCH’s office is not expected to have any direct impact on the market.

“This development will not affect the market as such,” the source said.