Record €31 trillion of OTC fixed income trades cleared in Q1 - up 28% yoy

LCH.Clearnet consolidates market leading position with 85% of cleared European government bond repo market

London, 14 April 2010

The nominal value of fixed income trades cleared by LCH.Clearnet reached a record €31 trillion in Q1 2010, driven by record figures of €12 trillion for March 2010. This is a year on year increase for the first quarter of 28% and the first time that LCH.Clearnet, which clears an estimated 85%* of the cleared European government bond repo market, has cleared trades with a value of more than €30 trillion in a quarter.

LCH.Clearnet’s fixed income service has become a key vehicle for secured interbank lending and borrowing as banks increasingly seek to minimise their counterparty risk exposures. This trend has resulted in a significant increase in the proportion of inter-bank repo trades which are cleared.

For over a decade, LCH.Clearnet has worked closely with its members to develop innovative clearing solutions for the fixed income markets, generating significant efficiencies in the management of collateral in the euro and sterling repo markets.

John Burke, director of fixed income, said: “The continued growth in fixed income volumes highlights the more cautious approach to risk management prevalent in the markets.  The recent crisis has highlighted the critical role clearing plays in ensuring that interbank liquidity is maintained, even in highly volatile markets.”

LCH.Clearnet is the second largest clearer of bonds and repos in the world, providing services across 10 government markets.  It has been clearing OTC fixed income trades for over 10 years.

*ICMA’s latest European repo market survey used for approximate market size comparisons.

To view the press release as a pdf click here.

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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.