SwapClear to clear OTC Rate Derivatives in 6 new currencies
20 key currencies now cleared 

London, 13 October 2010

LCH.Clearnet Limited’s (LCH.Clearnet) SwapClear service is to extend the range of currencies cleared from 14 to 20.  From Q1 2011, interest rate swaps (IRS) denominated in HUF, CZK, KRW, MXN, BRL and SGD will be clearable.

This extension, which follows consultation with market participants, enables over 95% of the global IRS market to be cleared through SwapClear.  This will further facilitate the transition of the OTC IRS market into clearing, in line with the thrust of regulatory reforms globally. 

Michael Davie, CEO, SwapClear said: “We strongly support the regulatory drive towards OTC clearing, where it is safe and prudent to do so.  Introducing additional currencies will lead to improved efficiencies through margin offsets across portfolios, as we have seen from the 14 currencies cleared to date. For over ten years SwapClear has led the way in OTC clearing and we are committed to continued development of the service, broadening its scope wherever possible. SwapClear has been clearing OTC products with buy-side clients since 2009 and we believe that a broader product range will confer greater benefits to users and to the OTC community as a whole".

The only truly global clearing service for IRS, the SwapClear service clears over 40% of the $349 trillion global market and has cleared over 1 million trades since launch in 1999.  In December 2009, LCH.Clearnet was the first clearing house to launch interest rate swap clearing for buy-side clients through SwapClear, offering a unique level of security to clients in the case of a bank default through margin segregation and portability of contracts.

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 the margin held and with no recourse to the default fund. 
 
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, commodities, energy, freight, 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.