LCH.Clearnet Ltd (LCH.Clearnet) is set to give US clients access to its market leading interest rate swap clearing service, SwapClear, via a Futures Commission Merchant (FCM) model, subject to regulatory approval. LCH.Clearnet intends to launch FCM access to SwapClear in late 2010.
The current SwapClear service offers clients market leading protection, including the option of full segregation of client margin and positions. The extension of the service and introduction of the FCM model is designed to maximise choice for customers. The FCM model will offer:
• Access to the market leading IRS clearing service via a familiar model
• All the protections of an FCM model, including:
o Portability of client collateral and positions
o Arrangements will be governed by New York law
o Initial margin collateral held in the US
Roger Liddell, CEO, LCH.Clearnet said: "This extension of the SwapClear service reflects our commitment to customer choice. We want to provide customers with the access model that best suits their needs, whilst preserving the integrity and risk mitigating benefits of SwapClear.
"This development reflects feedback from key customers and the broad thrust of proposed legislative changes."
As market participants worldwide seek to mitigate their counterparty risk, SwapClear's market leading global position has been further strengthened. Established in 1999, SwapClear is the only truly global clearing service for IRS, now clearing over 40% of the market and USD218 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.