Asset manager Aquila Capital Management has cleared its first OTC interest rate swaps (IRS) via derivatives broker Newedge’s membership of SwapClear.
Aquila, a specialist European alternative assets fund manager, uses IRS as a core part of its investment and risk management process.
It said switching its business to clearing via a central counterparty (CCP) will enable it to benefit from reduced counterparty risk and comply with increased regulatory obligations. SwapClear is the OTC derivatives clearing arm of London Stock Exchange-backed LCH.Clearnet.
"At Aquila Capital, we always aim to keep our OTC exposure as low as possible and prefer centrally cleared solutions. The introduction of the EMIR legislative in Europe supports our approach even further. Our decision to begin clearing IRS via SwapClear was not only motivated by it becoming mandatory in 2014 but also by the fact that it will provide us and our investors with greater transparency," said Roman Rosslenbroich, CEO Aquila Capital.
Newedge said its platform enables firms to manage their risk with a choice of global CCPs as well as providing support to meet new regulatory reporting rules.
The introduction of the European market infrastructure regulation will require OTC derivatives trades to be centrally cleared and reported to a trade repository.
Rosslenbroich said the incoming regulation is having a significant effect on the way his firm trades, though is largely positive.
"Going forward, the trade and booking process will actually be straight through with more automated trade-matching systems. This helps everyone involved in the trade process, as well as our custodians. To facilitate this, we had to slightly adapt our IT infrastructure, but we are continuously enhancing our IT environment anyway."
Hamburg-based Aquila has €7.2 billion of asset under management.