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Contact:Andrea Schlaepfer / Rachael Harper, Corporate Communications, London
Tel: +44 (0)207 426 7463/7175
Catherine Gully / Fiona Petrovic, Corporate Communications, Paris
Tel: +33 (0)1.70.37.66.24/66.81

LCH.Clearnet launches clearing services for Credit Default Swaps

Paris, 30 March 2010

LCH.Clearnet SA (LCH.Clearnet) today announced that it successfully cleared the first credit default swap (CDS) index contracts on Monday 29 March.

Both regulators and market participants have been keen to see clearing for CDS introduced to bring security and transparency to the OTC derivatives markets. The service, launched in response to this demand, has seen tremendous support from clearing members. They have been key in developing the offering in collaboration with LCH.Clearnet to ensure that it is fully in line with market practices and meets the core requirements that have been determined by the industry and policy groups.

The introduction of clearing brings greater protection to the CDS market, enabling market participants to benefit from reduced counterparty risk, straight through processing, post-trade anonymity, and a proven track-record in risk and default management. Initially, the service covers European indices, with the intention to expand the offering based upon market demand.

Commenting on the initiative, Christophe Hémon, Chief Executive, LCH.Clearnet SA said, “This successful launch demonstrates our ability to deliver innovative OTC clearing solutions across LCH.Clearnet Group, the global leader in OTC clearing. The collaboration and the support of market participants have been critical in the development of this service and we look forward to working with them to enhance our clearing offering.”

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To view the press release as a pdf click here.

About LCH.Clearnet

LCH.Clearnet is the leading independent clearing house 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, energy, freight, interbank interest rate swaps 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 clearing house sits in the middle of a trade, assuming the counterparty risk involved when two parties (or members) trade.  When the trade is registered with a clearing house, it becomes the legal counterparty to the trade, ensuring the financial performance; if one of the parties fails, the clearing house steps in.  By assuming the counterparty risk, the clearing house underpins many important financial markets, facilitating trading and increasing confidence within the market.
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 clearing house’s highly experienced risk management teams, who 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.