LCH.Clearnet’s SwapClear Launches Major Enhancements to FCM Service

-- Significant upgrades include extended choice of collateral, increased connectivity, enhanced trade submission and risk-free compression--

New York, December 5, 2011 — LCH.Clearnet Limited (LCH.Clearnet), the world’s leading independent clearinghouse and a CFTC-regulated DCO, today announced that it has gone live with significant enhancements to its SwapClear service. Following extensive consultation with the buy side and Futures Commission Merchants, SwapClear now accepts a broader range of collateral for initial margin and offers increased connectivity and variable notional swaps. In addition, the platform offers risk-free compression and flexible trade submission and is now directly accessible via Tradeweb and Bloomberg (VCON and Electronic Trading) through SwapClear’s ClearLink API in addition to MarkitSERV.

“Today’s rollout exemplifies our commitment to innovation. We engage continuously with clients and are determined to offer solutions that help them efficiently manage their IRS business,” said Daniel Maguire, head of SwapClear U.S. “These enhancements will support the entire buy-side community as it moves toward the adoption of centralized clearing.”

“We are excited to be working with SwapClear in order to leverage its successful interest rate clearing offering,” said Michael Dawley, global co-head of Derivatives Clearing Services at Goldman Sachs.

"SwapClear’s commitment to continuous development and innovation delivers a solution that is attuned to our clients’ changing risk management requirements. Managing counterparty risk is of the utmost importance, and we are therefore delighted to be providing access to this established and successful IRS clearing platform.”

According to the International Swaps and Derivatives Association (ISDA), SwapClear currently clears more than 50 percent of all OTC interest rate swaps globally and more than 95 percent of the overall cleared OTC interest rate swap market. SwapClear regularly clears in excess of $1 trillion in new OTC IRS trades each day and has close to 1 million cleared trades outstanding, equating to $290 trillion in notional open interest, including $226 billion in client clearing business.

“Enhancing the central clearing offerings is key to driving support across the entire industry,” said Raymond Kahn, head of OTC Derivatives Clearing, Barclays Capital. “Providing a multi-currency and global offering, combined with a proven track record in interest rate swaps clearing, will help to advance the adoption of OTC derivatives clearing.”

“Morgan Stanley has been working closely with LCH.Clearnet on the evolution of its U.S. offering and believes that the current SwapClear service enhancements establish several important changes, including the expansion of SwapClear’s eligible product set and the improvement of middleware connectivity,” said Andrew Huszar, U.S. head of OTC Clearing at Morgan Stanley. “We are pleased to participate in this rollout, given our commitment to partner actively with clearinghouses and clients in the voluntary adoption phase of OTC Client Clearing.”

The following is a selection of the SwapClear features that have launched today:

• Multiple ways to connect directly — SwapClear’s new ClearLink API provides execution venues the opportunity to send trades directly to SwapClear. TradeWeb and Bloomberg, which support both voice and electronic trading, are early adopters of this service. MarkitSERV has also upgraded its connection to deliver trades through SwapClear’s ClearLink API.

• Extended range of acceptable collateral for FCM client clearing — CAD, EUR, GBP and JPY cash can be used to cover initial margin requirements, plus a wide range of non-USD sovereign and government-guaranteed bonds.

• Broadest product range — Now including variable notional swaps, additional day count conventions and OIS discounting for JPY.

• Flexible risk-free compression — Clients can select to net at all account levels, giving them a fully customizable solution.

• Enhanced allocation workflow — Trades can be allocated across multiple FCMs, with anonymity and trade status updates for all counterparties.

• Safer and more efficient portability — Now has the ability to transfer customers’ positions and collateral from one FCM to another within the CCP, allowing for improved safety and efficiency.

For more information about the service, please go to www.swapclear.com or call 212-513-8282.

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To view the press release as a pdf click here.

About LCH.Clearnet

LCH.Clearnet 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, interbank 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.