LCH.Clearnet’s SwapClear clears Interest Rate Swap transactions for BlackRock

27 July 2011

BlackRock, Goldman Sachs, Barclays Capital and LCH.Clearnet Ltd (LCH.Clearnet) announced today that BlackRock has cleared its first two interest rate swap (IRS) trades on LCH.Clearnet’s SwapClear.

BlackRock executed one of the trades with Barclays Capital and the other with Goldman Sachs. These trades were both cleared through Goldman Sachs. BlackRock executed the transactions on the Tradeweb platform with the counterparties, allocated the trades and then, through MarkitServ, matched and transmitted the trades to SwapClear via its clearer.

The ability to provide connectivity to an execution platform like Tradeweb, and to facilitate multi-party execution and clearing, demonstrates the flexibility and efficiency of SwapClear’s FCM model. Launched in March 2011, the model has increased choice for the U.S buy-side, giving them access to the world’s leading IRS clearing service.

“Executing with multiple dealers while maintaining operational efficiency for clearing services is a terrific step forward for the industry," said Supurna VedBrat, Managing Director and Co-Head of Electronic Trading and Market Structure at BlackRock. "The client documentation framework set forth by the industry's new give-up agreements and clearing addendums facilitated executing a block trade with an executing dealer and giving it up to a clearer.”

“We are pleased to have participated as an executing broker for BlackRock and to have established a framework to clear multi-lateral OTC derivatives transactions by leveraging the recently published bilateral execution agreement," said Harry Harrison, Head of Rates Trading at Barclays Capital. "The adoption of central clearing will help improve liquidity, reduce systemic risk and bring greater transparency to the OTC derivatives markets, which will benefit all industry participants.”

“These interest rate swaps trades are among the first to be executed on an electronic platform and centrally cleared,” said Jack McCabe, Co-Head of Futures and Derivative Clearing Services at Goldman Sachs.  “These transactions demonstrate our ability to provide clients with front to back execution and clearing services in preparation for the new regulatory requirements.” 

Floyd Converse, Head of U.S SwapClear Sales and Marketing at LCH.Clearnet said: “We are delighted to be collaborating with BlackRock to ensure that our market leading offering evolves in line with the needs of the buy-side.  By clearing through SwapClear, clients benefit from a unique and proven default management process, portability, margin segregation and the ability to execute large block trades safely and efficiently.”

Jeff Gooch, CEO of MarkitSERV, said: “These milestone trades demonstrate that today’s infrastructure is poised to deliver electronically-executed trades to central clearing, in accordance with regulatory expectations.   We are pleased that our clients are going live with new trade processing workflows that streamline the process of clearing OTC derivatives by electronically matching and routing trades for clearing.”

“These trades clearly demonstrate the benefits market participants will derive from the electronic trading and processing of interest rate swaps. The new paradigm is just around the corner and we are delighted to be integrated with SwapClear in advance of derivatives regulation,” said Lee Olesky, CEO of Tradeweb.

To view the press release as a pdf click here.

About BlackRock

BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide.  At June 30, 2011, BlackRock’s AUM was $3.659 trillion.  BlackRock offers products that span the risk spectrum to meet clients’ needs, including active, enhanced and index strategies across markets and asset classes. Products are offered in a variety of structures including separate accounts, mutual funds, iShares® (exchange-traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions®.  Headquartered in New York City, as of June 30, 2011, the firm has approximately 9,700 employees in 26 countries and a major presence in key global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa.  For additional information, please visit the Company's website at www.blackrock.com.

About Barclays Capital

Barclays Capital is the investment banking division of Barclays Bank PLC.  With a distinctive business model, Barclays Capital provides large corporate, government and institutional clients with a full spectrum of solutions to their strategic advisory, financing and risk management needs.  Barclays Capital has offices around the world, employs 25,000 people and has the global reach, advisory services and distribution power to meet the needs of issuers and investors worldwide.

For further information about Barclays Capital, please visit our website www.barclayscapital.com.

About Goldman Sachs

The Goldman Sachs Group, Inc. is a leading global investment banking, securities and investment management firm that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals. Founded in 1869, the firm is headquartered in New York and maintains offices in all major financial centers around the world.

About LCH.Clearnet

LCH.Clearnet Group Limited 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, commodities, energy, freight, interest rate swaps, CDS 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.

About MarkitSERV

MarkitSERV, jointly owned by The Depository Trust & Clearing Corporation (DTCC) and Markit, provides a single gateway for OTC derivatives trade processing.  By integrating electronic allocation, trade confirmation and portfolio reconciliation, MarkitSERV provides an end-to-end solution for post-trade transaction management of credit, interest rate, equity and commodity derivatives.  MarkitSERV also connects dealers and buy-side institutions to trade repositories and all six major central clearing counterparties worldwide.  

About Tradeweb

Tradeweb is a leader in building and operating financial markets. As a pioneer in the development of electronic trading and trade processing, the company provides services in the fixed income and derivatives markets to clients in more than 50 countries. Since 1998, Tradeweb has operated a global fixed income and derivatives trading network that harnesses the distribution of the major investment banks with over 2,000 institutional clients. In 2008, Tradeweb introduced inter-dealing broking capability with the acquisition of voice broker Hilliard Farber and subsequently launched Dealerweb, an electronic IDB platform.  Tradeweb Retail provides a trading and sales application to fixed income brokers and traders.