LCH.Clearnet and TriOptima announced that SwapClear members eliminated 31,280 EURO-denominated interest rate swap trades with a notional value of €3 trillion ($4.55 trillion USD) in the largest triReduce termination cycle conducted to date within SwapClear.
Twelve of SwapClear's twenty-five clearing members participated in the cycle.
This initiative is another example of the industry's response to regulatory goals for reducing risk in the OTC derivatives market. Terminating the transactions and eliminating them from LCH.Clearnet's SwapClear service facilitates systems processing and reduces the administrative burden in the event of a default. The average duration remaining for the terminated trades was close to 10 years.
Joe Reilly, LCH.Clearnet director, SwapClear said: "Clearing interest rate swaps through SwapClear greatly reduces counterparty exposure and improves market liquidity. Subsequent compression of the notional value of cleared transactions, using a service like triReduce, creates further efficiencies by reducing operational costs and risks associated with trade count and notional volumes outstanding. Thanks to the commitment of all those involved we were able to terminate 89% of all the matched trades between the participating banks."
"We are pleased to be working with the industry to improve the infrastructure and enhance efficiencies within the interest rate swap market," said Ulf Andersson, global business manager for triReduce. "Beginning with the November termination of GBP swaps in SwapClear, we anticipate that a series of cycles scheduled in 2010 will achieve significant reductions in clearing house exposures."
The termination cycle was assisted by MarkitSERV using its MarkitWire automated link to SwapClear to complete updates to dealer portfolios of cleared trades.
TriOptima and LCH.Clearnet have planned a series of future cycles to terminate additional EUR, GBP, JPY, and USD interest rate swaps in SwapClear.