MUSI joins LCH.Clearnet’s SwapClear

Mitsubishi UFJ Securities International plc (MUSI) is now clearing its interest rate swap (IRS) business through LCH.Clearnet Limited’s (LCH.Clearnet) market leading interest rate swap clearing service, SwapClear, significantly reducing counterparty, credit and operational risk.

As the London-based securities and investment banking boutique of one of the world’s largest financial institutions, MUSI is committed to responding quickly to market and client demands. With a total value of $347 trillion, interest-rate swaps continued to be the largest part of the OTC derivatives market in the first half of 2010 (Bank for International Settlements, 2010).

Kirsty Brown, Head of Business Development and Strategy at MUSI, comments, “Increased regulation and scrutiny mean reducing risk in the fast-growing OTC market is a substantial challenge. LCH.Clearnet is the industry standard in clearing and counterparty services and our partnership confirms MUSI’s commitment to offering the best possible protection from risk.”

Michael Davie, CEO of SwapClear at LCH.Clearnet said: “The speed with which MUSI has introduced clearing for its IRS business attests to their commitment to manage risk.   We look forward to providing them with the benefits of centralised clearing such as reduced counterparty risk, increased capital efficiencies and lower operational costs. This extension to SwapClear’s membership confirms the key position that our service has established within the OTC post-trade environment. ”

The only truly global clearing service for IRS, the SwapClear service clears over 40% of interest rate swaps globally. 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 introduction of the FCM (Futures Commission Merchant) model for SwapClear early next year* will increase choice for US based customers, enabling them to clear with the world’s leading interest rate swap service within a familiar framework.

*subject to regulatory approval

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To view the press release as a pdf click here.

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About MUSI

MUSI is the London based securities and investment banking subsidiary of Mitsubishi UFJ Securities Holdings Co., Ltd., itself part of one of the largest financial institutions in the world, Mitsubishi UFJ Financial Group, Inc. (MUFG).

MUSI is active throughout the international capital markets and is engaged in market-making and dealing in the debt, equity-linked and derivatives financial markets; and the management and underwriting of issues of securities and securities investment. It provides a wide range services to governments, their monetary authorities and central banks, supra-national and sub-national organisations, private financial institutions, corporations, and high net wealth individuals.

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.

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