LCH.Clearnet launches CDSClear Internationally

15 May 2012 - LCH.Clearnet SA (LCH.Clearnet) today announces the launch of its international CDSClear service, an extension to the established domestic French offering launched in March 2010.  CDSClear now offers an innovative, multi-jurisdictional CDS clearing framework.

CDSClear currently works with four French member banks (BNP Paribas, Credit Agricole Corporate & Investment Bank, Natixis, Société Génerale), however, following the launch LCH.Clearnet is pleased to announce that it will now be working with an additional 10 international institutions - BofA Merrill Lynch, Barclays, Citigroup,  Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Morgan Stanley and UBS.

CDSClear clears Series 5 and above of the Markit iTraxx Europe, HiVol and Crossover indices which together comprise 129 contracts. The newly launched international service builds on LCH.Clearnet’s extensive OTC clearing and default management expertise.   The default management processes introduced by CDSClear are unique to the cleared CDS market and have been carefully designed to manage the unique characteristics of the credit derivative markets within the context of the current regulatory environment.

CDSClear will shortly launch its intra-day clearing service and European Single Name CDS will be introduced later this year with offsets against CDS index products, subject to regulatory approval.  CDSClear is also actively working towards delivery of an International Client Clearing service later this year, including a US offering.

Charlie Longden, CEO, CDSClear said; “This launch brings real choice to the international cleared CDS market.  We’ve built upon our extensive OTC expertise and adapted it to provide robust risk and default management within the context of the specific characteristics of the credit markets. We are working hard on building our client offering and are keen to engage with clients globally and gain their input into its development.”

Ian Axe, CEO of LCH.Clearnet Group said: “This latest development in CDSClear complements our existing interest rate swap and foreign exchange OTC offerings enabling LCH.Clearnet to offer clearing services across the broadest range of OTC derivative asset classes and geographies in the market, thereby consolidating our position as the leader in OTC clearing.  The CDS market opportunity is significant and this launch both augments our offering and is a major step forward.”

Stephen O’Connor, Managing Director and Global Head of OTC Client Clearing, Morgan Stanley said “Morgan Stanley is proud to be working with LCH.Clearnet on the expansion of their CDSClear service to international users.  LCH.Clearnet is a recognised leader in OTC Derivatives clearing and the enhanced CDS service will offer members and their clients greater choice and flexibility in clearing CDS trades.”

Niall Cameron, Managing Director, Global Head of Credit Trading at HSBC said: “In this evolving regulatory environment, the expansion of CDSClear is a positive addition to the infrastructure of the world’s credit markets.”

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Contact

Andrew Garfield/ Gill Ackers (Brunswick Group) +44 (0) 20 7404 5959   

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, foreign exchange derivatives, 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 a trade is registered with a clearing house, that clearing house becomes the legal counterparty to the trade, ensuring financial performance of the trading parties; 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 these markets.

Initial and variation margin (or collateral) is collected from clearing members; should they fail, this margin is used to fulfil their obligations. The amount of margin is decided by the clearing house’s highly experienced risk management teams, which 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.