LCH.Clearnet has record Q3 for OTC emissions 

London, 05 October 2010

LCH.Clearnet Ltd (LCH.Clearnet) OTC emissions clearing service has had a record third quarter, with volumes increasing 148% on the same period last year.  September was a particularly strong month with open interest increasing 281% year on year. The service clears contracts on EU Allowances and Certified Emissions Reductions (CER).

The growth is due to the appetite for cost effective and operationally efficient OTC clearing services for emissions. In addition, five new clearing members joined the service in 2010, facilitating access and giving market participants the choice of 14 clearing members.

Isabella Kurek-Smith, director, energy and freight said; “Customers want the flexibility offered by OTC trading, combined with the operational and cost benefits of a highly effective clearing service.  We are delighted by the growth in the service and look forward to working with the OTC emissions trading and broking community to build and enhance our emissions offering.”

To view the press release as a pdf click here.

About LCH.Clearnet

LCH.Clearnet is the leading independent clearing house group, the world’s largest clearer of OTC derivatives and in addition serves major international exchanges and platforms.  It clears a broad range of asset classes including: securities, exchange traded derivatives, commodities, energy, freight, 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.