OTC interest rate derivatives for six new currencies

LCH.Clearnet Limited’s (LCH.Clearnet) SwapClear service is to extend the range of currencies cleared from 14 to 20. From Q1 2011, interest rate swaps (IRS) denominated in HUF, CZK, KRW, MXN, BRL and SGD will be clearable.

This extension, which follows consultation with market participants, enables over 95% of the global IRS market to be cleared through SwapClear. This will further facilitate the transition of the OTC IRS market into clearing, in line with the thrust of regulatory reforms globally.

Michael Davie, CEO, SwapClear said: “We strongly support the regulatory drive towards OTC clearing, where it is safe and prudent to do so. Introducing additional currencies will lead to improved efficiencies through margin offsets across portfolios, as we have seen from the 14 currencies cleared to date. For over ten years SwapClear has led the way in OTC clearing and we are committed to continued development of the service, broadening its scope wherever possible. SwapClear has been clearing OTC products with buy-side clients since 2009 and we believe that a broader product range will confer greater benefits to users and to the OTC community as a whole".

The only truly global clearing service for IRS, the SwapClear service clears over 40% of the $349 trillion global market and has cleared over 1 million trades since launch in 1999. In December 2009, LCH.Clearnet was the first clearing house to launch interest rate swap clearing for buy-side clients through SwapClear, offering a unique level of security to clients in the case of a bank default through margin segregation and portability of contracts.

The resilience of SwapClear’s default management process was demonstrated in September 2008 when it successfully handled Lehman Brothers’ USD9 trillion interest rate swap default. The highly effective default management process ensured that over 60,000 trades were hedged and auctioned off to other clearing members in a timely fashion and that the default was managed well within the margin held and with no recourse to the default fund.

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