Record 2011 OTC freight volumes for LCH.Clearnet in September

14 October 2011

September was a record month for over-the-counter (OTC) dry bulk freight trades in 2011. LCH.Clearnet Limited’s (LCH.Clearnet) market leading freight clearing service cleared a total number of 86,000 lots. So far this year, monthly volumes have averaged at approximately 71,000 lots and open interest now stands in excess of 285,000 lots.

Freight volumes have rallied in recent weeks as a result of volatility in capesize rates and increased Chinese demand for Iron Ore shipments from Brazil. Following a year of lower price volatility and weaker prices in general, September’s results represent a welcome positive inflection in the market.

Cleared volumes now account for over 95% of total traded Dry FFA volumes, and LCH.Clearnet handles over 70% of these volumes.

LCH.Clearnet is committed to working closely with the industry to ensure that OTC freight clearing reflects the ongoing needs of the marketplace by continuing to develop and enhance its service, providing a robust, competitive and flexible offering. In July, clearing fees for dry bulk FFA trades were cut by 50%. LCH.Clearnet’s new clearing platform, ClearWay, is connected to 5 trading platforms, delivering true straight through processing as well as providing an improved registration platform for brokered trades.

Isabella Kurek-Smith, director, energy and freight said “These record volumes demonstrate the market’s appetite for effective and robust clearing services for OTC commodities. We are committed to providing a competitive offering: a combination of cost effective pricing, the highest standards of risk management and the capacity to clear a wide range of innovative products.”

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To view the press release as a pdf click here.

About LCH.Clearnet

The LCH.Clearnet Group 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.