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LCH.Clearnet launches OTC FX clearing

London, 19 March 2012

LCH.Clearnet Limited (LCH.Clearnet), the world's leading independent multi asset class clearing house, today began clearing foreign exchange (FX). The service is supported by 14 major market participants who have been actively involved in its establishment. A number of additional participants are scheduled to begin clearing in the coming weeks.

The new service, ForexClear provides clearing for FX Non Deliverable Forwards (NDFs) and was designed in close collaboration with our members. The service has launched with clearing between direct clearing members, whilst actively consulting with clients to deliver a full clearing service to other current and prospective clearing members, and their global clients in due course.

NDFs are cash settled products, actively traded in a range of high growth economy currencies.  From launch the service will clear NDFs in the following currencies - Brazilian Real, Chilean Peso, Chinese Yuan, Indian Rupee, Korean Won and Russian Ruble all against the United States Dollar.  Further currencies are being added to the service with the aim to provide 95% market coverage.

Gavin Wells, Managing Director, ForexClear, said; “In response to market demand and pending regulatory changes, we are delighted to be bringing LCH.Clearnet’s leading risk mitigating solutions to NDFs and we will be looking to broaden the service in line with client demand.”

ForexClear will build upon LCH.Clearnet’s 12 years of global OTC clearing experience.  SwapClear, its Interest Rate Swap (IRS) service, has a proven track record of successfully mitigating risk for its users with over $280 trillion OTC IRS notional outstanding in 17 currencies. In 2008 LCH.Clearnet successfully resolved Lehman Brothers’ $9 trillion OTC IRS default and is now able to extend its unique and robust risk management methodology to the FX market through ForexClear.

Ian Axe, CEO, LCH.Clearnet Group Limited, said; “Our FX service highlights the strength and breadth of our unique OTC expertise and our commitment to providing market leading risk management solutions across a wide range of asset classes. We shall continue to evolve our offering in line with client demand to ensure it offers the most effective risk management, as well as capital and operational efficiencies, to the FX marketplace.”


Please click here to view the press release as a pdf.

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.