CIBC joins LCH.Clearnet’s over-the-counter interest rate swap clearing service, SwapClear

15 March 2011

CIBC announced today that it has signed a letter of intent to join LCH.Clearnet Ltd’s (LCH.Clearnet) SwapClear, a global clearing service for over-the-counter (OTC) interest rate swaps.

By joining SwapClear, CIBC will be able to meet clearing requirements that the bank’s U.S. counterparties will be subject to under the Dodd-Frank Act concerning interest rate swaps. CIBC will also be well-positioned to be in compliance with G20 commitments concerning OTC derivatives by the December 2012 deadline.

LCH.Clearnet’s interest rate swap clearing service, SwapClear, has cleared over 1.5 million OTC IRS trades since launch in 1999. It currently has 49 clearing members and its portfolio contains 850,000 trades with a notional value in excess of $266 trillion, down from $305 trillion as a result of terminating $39 trillion cleared IRS transactions through on-going compression. 

CIBC (TSX: CM) (NYSE: CM) is a leading North American financial institution with nearly 11 million personal banking and business clients. CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada, and has offices in the United States and around the world. You can find other news releases and information about CIBC in our Press Centre on our corporate website at www.cibc.com. 

To view the press release as a pdf click here.

   
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About LCH.Clearnet

LCH.Clearnet (then The London Produce Clearing House Limited) began clearing commodity futures in 1888.  Today it is the leading independent clearing house group, serving major international exchanges and platforms, as well as a range of OTC markets.  It clears a broad range of asset classes including: securities, exchange traded derivatives, energy, freight, interest rate 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, reducing risk, facilitating trading and increasing confidence within the market.

Initial and variation margin (both 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;  in IRS, 6 times intraday.  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.