Record OTC IRS volumes for LCH.Clearnet's SwapClear

London, 13 December 2010

November saw record volumes for LCH.Clearnet Limited's (LCH.Clearnet) market leading interest rate swap clearing service, SwapClear. The total number of cleared OTC trades for the month reached 76,650 trade sides, 12% more than October and a 24% increase on November 2009. The increased figures bring the total outstanding number of IRS transactions to 1,720,390 trade sides with a notional value of USD248.3 trillion equivalent.

The last quarter saw an average of 3,309 trade sides cleared daily and over the last five years the notional value has risen at a 40% per annum compound rate, demonstrating the value of the SwapClear clearing model. 

Michael Davie, CEO, SwapClear at LCH.Clearnet said: “The strong growth in IRS volumes indicates that SwapClear’s clients recognise the benefits of a cost-effective, high-performing clearing service which complements the flexibility of OTC trading.  The regulatory changes, aimed at strengthening financial stability, mean that participants will increasingly seek to manage their risk through central clearing. We are delighted to see demand for such services continue to grow ahead of the implementation of the legislative reforms.”

Established over eleven years ago, SwapClear’s membership has grown steadily and now clears trades for 35 direct members and their clients, while the product scope has grown to cover the world’s 14 largest currencies with tenors up to 50 years in USD, EUR and GBP. The only truly global clearing service for IRS, SwapClear now clears approximately 50% of the market by notional value and has cleared over 2.7 million trades since launch in 1999.

In December 2009, LCH.Clearnet was the first clearing house to launch IRS 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 IRS clearing service within a familiar framework.

*subject to regulatory approval

NB: Volumes are measured in trade sides for consistency with statistics published by BIS and other sources.

 To view the press release as a pdf click here.

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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.