LCH becomes first to clear credit index options

LCH’s CDSClear platform has been extended to include credit index options clearing.

LCH has extended its CDSClear platform to include the clearing of credit index options as it looks to bring its members additional funding, capital and operational benefits.

The central counterparty clearing house (CCP) said it is the first to design, develop and implement a risk model for the clearing of credit index options.

LCH added the new model will allow clients to profit from portfolio margining, margin optimisation, operational risk reduction and funding benefits.

IHS Markit will process cleared credit index options for both dealer-to-dealers and dealer-to-client flows using its post-trade service MarkitSERV.

Frank Soussan, global head of CDSClear at LCH, explained the platform has gone from strength to strength with significant volumes increases over the last 12 months.

“By extending CDSClear to the clearing of credit index options, members and clients can take advantage of significant funding, capital and operational benefits,” he said.

Samik Chandarana, head of global credit index trading at JP Morgan, added the launch will provide members with more opportunities for netting and the ability to better manage initial margin.

Similarly, Francois Popon, head of European CDS trading at Societe Generale, commented evolving regulations and significant capital and operational factors have acted as a driver for the bank to continue using LCH and CDSClear as a clearing service.

LCH said the CDSClear credit index options clearing service has been approved by regulators in Europe and the US, and it will be rolled out in two phases.