SwapClear Enhancements Drive Additional $32.7 billion of IRS Client Clearing

NEW YORK, Dec. 19, 2011 /PRNewswire/ -- LCH.Clearnet Limited (LCH.Clearnet), the world's leading independent clearinghouse, today announced that SwapClear, its interest rate swap (IRS) clearing service, saw a rise in notional volume of $32.7 billion for buy-side client clearing over the last two weeks. This brings the total buy-side notional volume outstanding to $257 billion. The increased volumes follow recent service enhancements and demonstrate the market's appetite for robust clearing solutions. 

Introduced on December 5 following extensive consultation with both the buy-side community and futures commission merchants, SwapClear's enhancements include a broader range of collateral accepted for initial margin, risk-free compression, variable notional swaps, flexible trade submission and increased connectivity using SwapClear's ClearLink API.

"Buy-side response to the enhancements—especially in the U.S.—drove the increase in volumes we've seen over the last two weeks," said Daniel Maguire, head of SwapClear U.S. "SwapClear's recent service enhancements were designed to meet buy-side client demand, particularly in terms of the expanded range of collateral now accepted for initial margin. This includes the Canadian dollar, euro, yen and pound sterling."

"J.P. Morgan was delighted to clear several clients' trades during the first clearing cycle of the enhanced SwapClear service," said Piers Murray, managing director of OTC IR product clearing for J.P. Morgan. "With mandatory clearing on the horizon for mid-2012, we are comforted by the availability of clearing in 17 currencies and the broadened collateral pool, enabling clients to achieve maximum margin efficiencies for their existing books of business."

"The recent enhancements made by LCH.Clearnet to its SwapClear service add to a growing market capability in the IRS clearing landscape," said Bob Burke, global head of OTC clearing at Bank of America Merrill Lynch. "BofA Merrill Lynch was pleased to use the enhanced service to clear client trades and will continue its partnership with SwapClear and the broader buy-side community to further promote the benefits of centralized clearing."

The SwapClear service was launched in 1999 by LCH.Clearnet, a CFTC-regulated derivatives clearing organization since 2001. The one million trades in SwapClear have an aggregate notional principal amount of more than $288 trillion, with a further $89 trillion of cleared transactions removed through multilateral trade compression.

"The latest enhancements make the SwapClear service a very competitive and compelling IRS clearing option for U.S. buy-side clients," said Christopher Perkins, global head of derivatives clearing at Citi. "The changes are in direct response to our clients' requirements, so they have been well received."

About LCH.Clearnet

The LCH.Clearnet Group is the leading independent clearinghouse group, serving major international exchanges and platforms, as well as a range of OTC markets. It clears a broad range of asset classes, including securities, exchange-traded derivatives, commodities, energy, freight, interest rate swaps, CDS, and euro- and sterling-denominated bonds and repos, and works closely with market participants and exchanges to identify and develop clearing services for new asset classes.

A clearinghouse sits in the middle of a trade, assuming the counterparty risk involved when two parties (or members) trade. When a trade is registered with a clearinghouse, that clearinghouse becomes the legal counterparty to the trade, ensuring financial performance of the trading parties; if one of the parties fails, the clearinghouse steps in. By assuming the counterparty risk, the clearinghouse underpins many important financial markets, facilitating trading and increasing confidence within these markets.

Initial and variation margin (or collateral) is collected from clearing members; should they fail, this margin is used to fulfill their obligations. The amount of margin is decided by the clearinghouse's highly experienced risk management teams, which assess a member's positions and market risk on a daily basis. Both the soundness of the risk management approach and the resilience of its systems have been proven in recent times. LCH.Clearnet is regulated or overseen by the national securities regulator and/or central bank in each jurisdiction from which it operates.

SOURCE LCH.Clearnet Group