European first as LCH.Clearnet clear CFDs

London, 25 October 2010 

LCH.Clearnet Ltd (LCH.Clearnet) has gone live with Europe’s first clearing service for contracts-for-difference (CFDs).  LCH.Clearnet acts as the central counterparty to LMAX, the new multilateral trading facility for retail customers.  The initial offering includes Equity Indices, Commodities & Interest Rate contracts.  

CFDs are cleared through LCH.Clearnet’s EquityClear service. The centrally cleared CFD has all the standard CFD benefits, including the ability to hedge or leverage a position and reduced counterparty risk.

Against the backdrop of global regulatory developments, the launch highlights LCH.Clearnet’s unique ability to leverage its extensive risk management and clearing capabilities across multiple asset classes, both listed and OTC.

Alberto Pravettoni, Managing Director, LCH.Clearnet Ltd said: “Being the first in Europe to launch clearing for CFDs demonstrates our ability to deliver innovative products.  Following a successful launch, we look forward to developing this ground-breaking new service.” 

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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.