LCH.Clearnet Ltd (LCH.Clearnet) and TriOptima announced that SwapClear members had torn up $500 billion notional in GBP-denominated interest rate swaps in a triReduce termination cycle, thereby eliminating them from LCH.Clearnet's SwapClear service.
Twelve of SwapClear's 25 members took part in the process. The elimination of superfluous trades facilitates systems processing and reduces the administrative burden in the event of a default. The average duration remaining for the terminated trades was 11 years.
MarkitSERV, a recently formed company which combined DTCC and Markit's electronic trade confirmation and workflow platforms, assisted the process by using its MarkitWire automated link to SwapClear to complete updates to dealer portfolios of cleared trades in the available three-hour window.
"This initiative highlights that the Rates industry is being pro-active in driving down both the notional and number of outstanding derivative transactions," said Andy Powell, Global Rates Business Manager at J.P.Morgan. "Managing the number of transactions in the clearinghouse is vital in a business where the maturity of the transactions can be very long dated. Using a proven tool like the triReduce service to run compressions significantly reduces our execution risk."
"We are pleased to have the opportunity to work with LCH.Clearnet and SwapClear members in their efforts to complement the efficiency of SwapClear," said Mireille Dyrberg, CEO of TriOptima EMEA. "We look forward to additional termination events in other currencies."
Alberto Pravettoni, Managing Director, Commercial Services, LCH.Clearnet said: "The successful run of triReduce has proved the effectiveness of the trade architecture in the rates market. Eliminating trades further enhances efficiencies within SwapClear and frees up capacity, facilitating the further expansion of this successful service."
This is one in a series of cooperative efforts between TriOptima, LCH.Clearnet and MarkitSERV to reduce the interest rate swaps maintained within SwapClear across the full range of currencies.