LCH.Clearnet SA launches Spanish government bonds and repo clearing service

Over €4 billion in notional volumes cleared on first day

Paris, 20 December 2010

LCH.Clearnet SA launched clearing for Spanish government bonds and repos on Friday 17 December, due to considerable demand from the trading community.  On its first day, the service cleared over €4 billion in notional volumes. 

The new service is operated by LCH.Clearnet SA’s bond and repo service with trades settling at Iberclear, the local CSD.  Initially, trades will be accepted via ICAP, with other trading platforms to be connected early in 2011. With over 12 years experience clearing French and Italian debts, this is a natural extension to LCH.Clearnet SA’s product scope.

The offering complements LCH.Clearnet Limited’s RepoClear’s Spanish debt service launched on 9 August, which allows trades to be settled at either Clearstream Banking Luxembourg or Euroclear bank, the international CSDs.

Spanish bonds are accepted by LCH.Clearnet SA as collateral to cover margins. A direct account with the Bank of Spain can also be used by Spanish clearing members to facilitate the payment of cash movements. Cross margining is applied between French, Italian and Spanish debts.

Christophe Hémon, Chief Executive Officer, LCH.Clearnet SA said: “There has been strong demand from the Spanish trading community for us to launch this service which allows settlement in Iberclear, the Spanish CSD. Clearing members using the service will benefit from reduced counterparty risk and trading anonymity amongst others benefits. Over 10 clearing members are already using the service and cleared over €4 billion in notional volumes on first day.”

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.