LCH expands SwapsClear

LCH expands SwapsClear

London Clearing House has widened the scope of its SwapsClear trading service and recruited ABN Amro, JP Morgan and Commerzbank Securities as new members.

In a move billed as a major service expansion, the interbank interest rate swap clearing service has extended the maximum tenor of trades denominated in US Dollars, Euro, Yen and Sterling from 10 to 30 years and added Swiss Francs to the range of currencies cleared.

Additionally, the company says that new recruits ABN Amro, Commerzbank Securities and JP Morgan have started implementation with a view to going live later this year. These new members bring the total number of participants in LCH SwapClear to 19, further building upon the critical mass achieved in the interbank swap market by the service following the adoption by the OTCDerivNet group of banks.

The latest upgrade to the service comes ahead of the expected October launch of Swapswire, a much-delayed electronic dealing system for interest rate derivatives processing established by a consortium of 23 banks.

Originally launched in September 1999, LCH SwapClear says it currently has trades with an aggregate notional principal in excess of $3 trillion in the service and with the introduction of 30 year clearing more backloads are expected shortly, as members finish their implementation and testing.

David Hardy, chief executive, LCH says: “Volumes from back-loaded trades from existing bilateral portfolios and new business being presented for clearing are increasing strongly as our newer members complete their implementation process. Adding the extension to thirty years and Swiss Franc swaps out to ten years maturity will allow members to load up a further important segment of their swap book, leading to fresh capital, credit and operational savings."

Stephen O’Connor, managing director, Morgan Stanley and chairman, OTCDerivnet, adds: "With the new members and the introduction of the maturity extension to 30 years, many houses will be able to clear the majority of their global interbank swaps business through the LCH SwapClear system...Each member will now face only one, fully margined, central counterparty, instead of 18 counterparties bilaterally; significantly reducing systemic risk in the swaps market."

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