€ 130 bn of Spanish debt cleared in first month

London, 9 September 2010

LCH.Clearnet Ltd’s (LCH.Clearnet) Spanish government bonds and repos service has attracted tremendous support from market participants and cleared over €130 billion in notional volumes since launch on 9 August. 

Introduced in response to significant demand from both domestic and international banks the service is part of the RepoClear offering. Many participants are now signed up to the service and interest from a broad range of Spanish firms continues to grow. 

John Burke, director and head of fixed income, LCH.Clearnet said; “We’ve been very pleased with the positive response and progress to date.  Participants in our Spanish service include some of the world’s leading financial institutions and we are delighted to be working with them in this important market.” 

The service enables banks trading Spanish debt to benefit from anonymous bond and repo trading, reduced counterparty risk and potential for enhanced balance sheet netting, for the first time. It accepts both electronic and voice brokered trades from multiple trading sources.

Spanish debt is also eligible as collateral in LCH.Clearnet’s innovative RepoClear €GC service. The new Spanish clearing service operates 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 is the largest clearer of bonds and repos in Europe, providing services across 13 government markets. It clears approximately 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.

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, 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.