LCH.Clearnet Ltd (LCH.Clearnet) has received approval from the U.K Financial Services Authority (FSA) to extend its market leading interest rate swap (IRS) clearing service, SwapClear. Buy-side firms can now access the service through clearing members based in Ireland and Switzerland. The extension means that institutional investors are able to clear through members based in six countries; the U.S, the U.K, France, Germany, Ireland and Switzerland.
LCH.Clearnet is regulated in the U.K by the FSA and in the U.S by the Commodity Futures Trading Commission (CFTC), and its SwapClear service offers unique levels of protection to buy-side clients, in the event of a default of a clearing member, through margin segregation and portability of contracts.
Alberto Pravettoni, managing director, commercial services said: “We have over ten years experience of successfully clearing IRS and are the only clearing house to have managed an OTC default. Recently, we have seen a remarkable growth in demand for our SwapClear service and this latest development broadens the number of clearing members through which the buy-side are able to access the benefits of IRS clearing.”
SwapClear currently clears approximately 40% of the global interest rate swap market and has USD212 trillion in notional trades outstanding. 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.
