Record OTC IRS volumes for LCH.Clearnet's SwapClear - up 30% year on year 

London, 19 July 2010

A record number of over-the-counter (OTC) interest rate swap (IRS) trades were cleared in Q2 2010 by LCH.Clearnet Limited’s (LCH.Clearnet) market leading IRS clearing service, SwapClear.  The total number of trades for the quarter reached 191,694 trade sides, a 30% increase on Q2 2009, driven by record volumes in May of 73,440 trade sides.  The increased figures bring the total outstanding amount of IRS transactions to USD224.6 trillion.

Established over ten years ago, SwapClear’s membership has increased significantly to 32 direct members and the product scope has grown to cover the world’s 14 largest currencies with tenors up to 50 years in USD, EUR and GBP. The only truly global clearing service for IRS, SwapClear now clears over 40% of the market.

Joe Reilly, director, SwapClear said: "SwapClear was developed to provide a global solution for the IRS market. For ten years now it has delivered a secure, reliable and efficient environment for processing trades. The growing demand for the service and these impressive volumes demonstrate just how effective the SwapClear clearing model is.”

The resilience of SwapClear’s default management process was demonstrated in September 2008 when it successfully handled Lehman Brothers’ USD9 trillion interest rate swap default. The highly effective default management process ensured that over 60,000 trades were hedged and auctioned off to other clearing members in a timely fashion and that the default was managed well within Lehman Brothers’ margin held and with no recourse to the default fund.

LCH.Clearnet is both a Financial Services Authority (FSA) Recognised Clearing House and a Commodity Futures Trading Commission (CFTC) registered Derivatives Clearing Organization (DCO). 

To view the press release as a pdf click here.

-ends-

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.