Credit Suisse among first to bring non-member clearing to FX market
IHS Markit, a world leader in critical information, analytics and solutions, today announced that MarkitSERV has processed a year-to-date (YTD) monthly average of 54,000 cleared non-deliverable forward (NDF) agreements in 2017. The YTD 2017 data shows a 920 percent surge in the monthly average of NDF clearing volume over the same period in 2016.
Non-member clearing enters FX market
In April 2017, Credit Suisse cleared its first non-member NDF trade with LCH’s ForexClear on behalf of their client. Credit Suisse is one of the first futures commission merchants to intermediate FX clearing for non-captive customers. MarkitSERV processed the trade for submission to clearing, enabling Credit Suisse and their client to automate the clearing process.
“NDF clearing has seen strong interest as a response to the uncleared margin rules and other market factors,” said William Black, US head of OTC derivatives clearing at Credit Suisse. “We are proud to bring a scalable solution to this space and look forward to partnering with non-member clients as the market continues to develop.”
On September 1, 2016, new variation margin rules for uncleared derivatives came into effect, encouraging traders to clear more transactions. As a result, firms are examining the cost benefit of clearing across asset classes, including OTC FX.
MarkitSERV network central to growing volume of cleared OTC derivatives
Since 2013, MarkitSERV has provided electronic workflow and gateway services for clearing NDF contracts, electronically connecting four CCPs, 20 clearing members and their clients. Eligible transactions are routed to the clearinghouses by MarkitSERV, with automatic updates provided to counterparties.
MarkitSERV first delivered inter-dealer interest rate swaps (IRS) to LCH in 2004. Across asset classes this year, MarkitSERV routed more than 1.5 million intermediated trades to CCPs, also setting a new record.
“LCH is clearing record volumes of NDFs in its ForexClear service this year, averaging approximately $40 billion per day in 2017,” said Ankeet Dedhia, Americas lead, FX product at LCH. “We welcome the addition of Credit Suisse to ForexClear as another active member of the service, and look forward to working with them and the market to bring the significant margin, capital, risk and operational benefits of clearing to the broader FX community.”
Expectations for FX Options Clearing
“MarkitSERV streamlines trade settlement and clearing processes for a broad range of assets, enabling counterparties and clearinghouses to operate with greater efficiency and scalability,” said Peter Altero Jr., vice president – rates and FX at IHS Markit. “Some firms are still evaluating the benefits of FX clearing, but based on the history of other asset classes, we expect the demand will progressively grow in NDFs and could expand to other instruments, such as FX options. When firms clear trades, the margin impact is positive, and in addition, they lock in the operating efficiencies from centralized and automated trade management.”