UK clearing house LCH.Clearnet has rolled out SwapClear, its over-the-counter (OTC) interest rate swaps clearing service, to buy-side firms.
Using the SwapClear Client Clearing Service, institutional investors will be able to mitigate counterparty exposures to banks by having the ability to transfer margins and contracts to other broker-dealers in case of a default. Previously, SwapClear was only available for OTC interest swaps between inter-dealer brokers.
Subject to FSA approval of the service in relevant jurisdictions, the list of dealers offering the service to the buy-side will be: Banca IMI, Barclays Capital, BNP Paribas, BofA Merrill Lynch, Calyon, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Morgan Stanley, Nomura, Royal Bank of Scotland, Société Générale and UBS.
“We are seeing an ever-increasing focus on removing systemic risk from the OTC markets. We are pleased to have been able to deliver such rapid progress since we first announced our plans to launch the service in May,” said Roger Liddell, chief executive of LCH.Clearnet. “The extension of LCH.Clearnet’s established SwapClear service means that for the first time buy-side trading clients now have access to the benefits of interest rate swap clearing, a proven default management process, reduced counterparty risk, portability, margin segregation and improved operational efficiencies.”
According to LCH.Clearnet, the interest rate swaps market has the largest notional amount outstanding of any OTC derivative asset class. According to the Bank for International Settlements’ semi-annual survey, the value of notional value outstanding OTC interest swaps is US$341 trillion, US$208 trillion of which is accounted for by the buy-side community.