Societe Generale Prime Services, a global leader in multi-asset brokerage and clearing, today announced that its Futures Commission Merchant (FCM) has conducted its first customer Non-Deliverable Forward (NDF) cleared trade with LCH.Clearnet’s ForexClear service acting as the clearing house. The trade signifies the bank’s move toward providing active NDF clearing services and is a positive step in the development of a more capital and operationally efficient method for trading this product.
Nicholas Gionfriddo, Americas Head of OTC Clearing Sales for Societe Generale Prime Services, said: “As a market leader in cleared derivatives, this illustrates our commitment to OTC Clearing as well as our ability to leverage expertise and infrastructure to provide clients with solutions during a time of rapid industry change.”
In the current context: NDFs are not currently mandated for clearing and the upcoming Basel Committee on Banking Supervision will require margin for un-cleared bilateral positions. Clearing NDFs provides capital and operational efficiencies as well as achieves the systemic risk reduction sought by regulators. The bank’s proprietary cross-asset margining platform enables its customers to gain margin efficiencies by providing risk offsets across their entire portfolio. Additionally, Societe Generale Prime Services’ cleared derivatives processing model is robust and highly automated which reduces customer processing risk and cost of overhead.
Trading firms who transact NDFs outside of a centrally cleared environment face valuation challenges due to the wide variety of models used by their trading counterparts. The centrally cleared single valuation model approach provides a simple and highly transparent method for valuating client positions and portfolios. By reducing valuation complexity with a standardized model and daily reporting, centrally cleared NDFs provide customers with the assurance their accounts are being accurately valued in a timely fashion.
