LCH.Clearnet to clear Spanish government bonds and repos

London, 03 August 2010

LCH.Clearnet Group, the largest clearer of bonds and repos in Europe, will launch clearing for Spanish government bonds and repos.  The first service will be launched on 9 August 2010 in response to significant market demand from both domestic and international banks. It will be operated by LCH.Clearnet Limited’s (LCH.Clearnet) RepoClear service with trades settling at either Euroclear Bank or Clearstream Banking Luxembourg. In parallel, LCH.Clearnet SA is seeking to develop a complementary offering with a local settlement service.

For the first time, banks trading Spanish debt will be able to benefit from anonymous bond and repo trading, reduced counterparty risk and enhanced balance sheet netting. In line with RepoClear’s commitment to customer choice, the service will be able to accept both electronic and voice brokered trades from multiple trading sources.

John Burke, director and head of fixed income, LCH.Clearnet said; “Demand for us to launch this service has been growing steadily and market participants are keen for us to extend the benefits of our multi-market clearing and settlement service to Spanish debt.

“Reduced counterparty risk, anonymity when trading and the significant efficiencies that balance sheet netting brings are just some of the benefits of this service.  In time, clearing is also likely to contribute towards an increase in trading liquidity, as it has for other European government debt markets.”

Spanish debt is already eligible as collateral in LCH.Clearnet’s innovative RepoClear €GC service. The new Spanish clearing service will operate alongside a Spanish €GC Basket; thus allowing LCH.Clearnet to offer banks trading Spanish debt a standard settlement option or the opportunity to utilise tri-party settlement.

The LCH.Clearnet group clears an estimated 85%* of the cleared European government bond repo market. Q2 2010 volumes were up 37% on 2009, rising to an all time record of €35 trillion.

The Group is the largest clearer of bonds and repos in Europe, providing services across 10 government markets.

*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

The LCH.Clearnet group 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, credit default 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.