BMO joins LCH.Clearnet’s SwapClear 

15 March 2011

BMO Financial Group (BMO) is the latest bank to announce its intent to join SwapClear, LCH.Clearnet Ltd’s (LCH.Clearnet) market leading over-the-counter (OTC) interest rate swap clearing service. BMO has commenced implementation and will go live as soon as this is completed.

Established in 1817, BMO Financial Group is the oldest and the fourth largest bank in Canada serving more than 11 million personal, commercial, corporate and institutional customers in North America and internationally.

Patrick Cronin, Executive Managing Director at BMO Capital Markets said: “SwapClear membership will allow our Trading desks to efficiently manage our market risks and continue to service our core clientele in North America and abroad. We have begun implementation and expect to go live later this year. We are monitoring developments in financial regulations and will continue to adjust our trading approaches and memberships to accommodate ongoing client facilitation across all of our core markets.  As a leading provider in the Canadian and USD swap markets, our SwapClear membership represents an important next step in our continued participation in the global IRS market.”

Michael Davie, CEO of SwapClear, LCH.Clearnet said: ‘We are delighted to be providing a member of such calibre with our proven and reliable OTC clearing services. We fully support the regulatory aims to increase stability within the financial system and remain committed to enhancing the service we provide to deliver transparency and certainty to the global IRS market.”

LCH.Clearnet’s market leading 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.  SwapClear’s FCM (Futures Commission Merchant) service, launched this month,  has increased choice for U.S. based customers, enabling them to clear with the world’s leading interest rate swap service within a familiar framework.

-ends-

To view the press release as a pdf click here.

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.