LCH.Clearnet to clear Skimmed Milk Powder futures contracts

Paris, 18 October 2010

LCH.Clearnet SA (LCH.Clearnet) is set to clear Skimmed Milk Powder (SMP) Futures Contracts traded on NYSE Liffe. Increasing price volatility in European and international dairy markets means both producers and market participants are looking to manage exposure to price risk through cleared trading opportunities.

Cleared SMP futures contracts will enable market participants to benefit from efficient price risk management, reduced credit risk, enhanced capital efficiency and the operational resilience of reliable and secure systems. The service is a natural extension to LCH.Clearnet’s commodities offering which has over 40 years proven experience.

The contracts will be traded in multiples of 24 tonnes, and will be delivered in January, March, May, July, September and November. Physical delivery will be carried out at delivery points that are within a 150km radius of Antwerp, Hamburg or Rotterdam, making this the vastest delivery zone in Europe. The first delivery will take place in March 2011. SMP contracts will be cleared through LCH.Clearnet’s standard derivatives clearing system.

Christophe Hémon, CEO of LCH.Clearnet SA said: “Skimmed Milk Powder is a valuable addition to our broad range of existing futures and options contracts. Volumes in the commodities segment have increased significantly over the past year and we believe that this trend will continue. It demonstrates our commitment to extending our clearing services in line with client and market demand.”

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.