LCH.Clearnet SA to clear “Cassiopeia” MTF for corporate bonds

Paris, 14 January 2011

LCH.Clearnet SA (LCH.Clearnet) today announces the launch of a clearing service* to support the “Cassiopeia” Multilateral Trading Facility (MTF) for corporate bonds, NYSE BondMatch®, in 2011. The ‘Cassiopeia Committee’ was formed in 2010 to explore ways of introducing secondary corporate bond platforms in Europe,  addressing market demands to improve transparency, liquidity,  post-trade services and reporting in the euro-denominated corporate bond market.

NYSE BondMatch®, NYSE Euronext’s MTF, responded to the specifications issued by the Cassiopeia Committee on 26 April 2010, and has chosen LCH.Clearnet to manage clearing of bonds traded on the platforms. The offer will encompass all euro-denominated international corporate, financial and covered bonds.

LCH.Clearnet will deliver an automated and fully integrated solution from trading through clearing to settlement. The settlement instructions will be processed through the major International Central Securities Depositories (ICSDs) and European national Central Securities Depositories (CSDs). Amongst other advantages, clients will benefit from reduced counterparty risk exposure and multilateral netting.

Commenting on the initiative, Christophe Hémon, Chief Executive of LCH.Clearnet SA said: “LCH.Clearnet is happy to provide its expertise to the “Cassiopeia” initiative to enhance transparency and guarantee the euro-denominated corporate bonds markets, in line with regulators’ willingness to reduce systemic risk by bringing more OTC products into clearing. Whilst benefiting from synergies of the cash equity’s business existing interfaces and processes, this new service will enable our clients to develop their business.”

*Subject to regulatory approval

 To view the press release as a pdf click here.

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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.