There is a good reason why clearing and settlement — the processes that ensure that once two parties have agreed to trade, the shares or other instruments are actually delivered and the money changes hands — are known in market jargon as “the plumbing”.

The processes are unglamorous, little-seen and little-considered, and those involved are sometimes regarded as mere technicians and backroom boys. But like plumbing, when clearing and settlement goes wrong, the consequences can be disastrous.

LCH.Clearnet is the successor to the London Clearing House, a venerable body whose history goes back to 1888 and is best known for providing clearing services for the London Stock Exchange, although it also covers a wide range of interest rate swaps and other derivatives.

Roger Liddell, a former banker at Goldman Sachs, arrived as chief executive in July 2006. He joined a business recovering from a catastrophic attempt to introduce a new technology package, which had failed, necessitating the writing-off of €68 million in costs and the departure of his predecessor.

Since then, the business has been in a state of ferment, with two potential takeover approaches and one internal restructuring falling by the wayside. Meanwhile, several other players have given notice that they plan to enter the clearing market and competitive pressures have forced down tariffs.

Mr Liddell and his team have just completed a complex and difficult restructuring, which he hopes will create the right structure to allow it to thrive post-recession. “It’s been a very intense period,” he admits. “At the end of the day, it was a great result. We’re very happy with it.”

The restructuring has involved most of the big City firms, because the company had been owned by 120 different institutions, most of them traders and the rest exchanges.

LCH.Clearnet was created in 2003 by the merger between the old clearing house in London, which began its life clearing commodities trading in the mid-Victorian mercantile boom, and Clearnet. This was the clearing service owned by Euronext, owner of various continental exchanges, including Paris and Amsterdam, and Liffe, the London financial futures market.

The merger left Euronext with a 45 per cent stake in the business, an unnecessarily high holding that has been reduced gradually. In addition, about 10 per cent of the business has been owned by so-called dormants, businesses such as those connected with the disgraced financier Bernard Madoff, which no longer trade.

The company had also built up substantial cash balances. Mr Liddell and his team’s job was to move off the shareholder register those businesses that did not need or want to be there, while returning spare cash to all shareholders. At the same time, the business had to square up to the more competitive environment, which required a cut in prices charged to customers.

“We believed it was necessary for us to lower our prices and make less profit and generate a lower return to shareholders,” he says. “For shareholders with higher economic expectations, that wasn’t the right thing at the time.”

This may seem paradoxical, a business that wants to make less profit, but the past few years have seen something of a philosophical debate over the role of clearing and settlement. Many exchanges have their own in-house process that does the work for them. But for companies such as the London Stock Exchange and Liffe, under their own competitive pressures from rivals, the priority is lower tariffs.

In addition, if banks that trade on these own large chunks of LCH.Clearnet, it makes sense to see the latter’s earnings cut to the bone, so offering traders lower costs, rather than allow profits to pile up to be recycled as dividends.

The aim is to have a clearing service that operates rather like a utility, making sufficient money to keep it going and provide investment to keep it competitive. This model is operated in the United States by the equivalent there, the Depository Trust & Clearing Corporation. In summer 2007 it and LCH.Clearnet went into talks about possible co-operation.

“Around that time, the world started to change dramatically,” Mr Liddell says. “A lot of our customers started to have second thoughts.” Lehman Brothers collapsed; the bank had $9 trillion of derivatives trading going through the books at LCH.Clearnet at the time.

This was successfully traded out through the market, something of a feather in the cap for the business. Meanwhile, the huge issue of Treasury bonds as part of the global financial restructuring promised a significant boost in revenues. A takeover by the Americans was no longer an option.

At around that time an alternative arose. A consortium of banks and other customers, many of them already investors, put together an offer at €11 a share, valuing LCH.Clearnet at about €830 million. They were keen on prospects for clearing over-the-counter derivatives, a fast-growing business: at present LCH.Clearnet has deals worth $200 trillion on its books, a rise of 30 per cent over the past year. The offer was rejected, with Mr Liddell and his team already working on a refinancing of their own.

Bankers on such deals love giving them unlikely nicknames. The consortium bid was known as “Lily”; the internal restructuring was “Valkyrie”. Neither made the cut, and the latest deal, codenamed “Marigold”, was drawn up.

It is a complex affair and little understood in the City, but, in essence, €111 million (£99 million) is returned to shareholders as a dividend, and another €333 million used to buy shares for cancellation. This removes the “dormants” from the share register and shrinks some other holdings, enlarging others. The money for this goes out of the LCH.Clearnet coffers on Thursday; thereafter, it will be 17 per cent-owned by various exchanges, which have an interest in retaining a seat in the boardroom, and 83 per cent by the customers, which want lower prices rather than dividends.

The restructuring was overwhelmingly accepted by shareholders. Mr Liddell is wary of discussing the state of the balance sheet or forecasting the sort of profits to be generated in future, but it is reckoned that cash balances have been eliminated, excepting those needed to keep the business operating. The company has started to deliver on promised tariff cuts. One round was brought in last July and in September Mr Liddell announced price cuts of another 50 per cent to take effect from January.

While all this restructuring has been taking place, the team at LCH.Clearnet has been continuing to grow the business. Clearing contracts have been won from a new exchange serving the North American electricity market and the Hong Kong Mercantile Exchange, which opens next year. The range of derivatives and other instruments cleared has been expanded. Several other overseas links are being negotiated. By the end of next year LCH.Clearnet expects to be open for 20 or 22 hours a day to service both the American and Asian markets.

Mr Liddell expects further price cuts under the new, lean structure. “We would expect that over the longer term we will continue to do the same. As we expand the business, we will become more and more competitive.”

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