Centrally Cleared Contracts for Differences

LCH.Clearnet operates a central counterparty service for the clearing and settlement of cash equities. The EquityClear service for equities provides for exchange members from multiple exchanges to settle their trades on a gross or net basis against the Clearing House locally in a variety of different (I)CSDs (International Central Securities Depository). 

The EquityClear service has been expanded to include Centrally Cleared Contracts For Difference (ccCFD) and will be tailored to clear CFDs executed on the Chi-X trading platform.

Chi-X Europe Ltd, through Chi-Clear will deliver a revolutionary new product to the market, allowing participants to bring ‘On Exchange’ Contracts for Difference (CFDs) and CFD hedged transactions for the purpose of risk management, financing, and netting, through a Central Counterparty. The ccCFD service will offer the world’s first CFD vs. Equity matching facility, allowing OTC CFD providers the opportunity to replace their equity hedging with a listed ccCFD equivalent.

The unique ccCFD service aims to complement the current OTC CFD model through retaining existing benefits such as best-execution hedging, while adding all the benefits of central counterparty clearing. Participants will enjoy risk mitigation from LCH.Clearnet, standardised contracts, increased stock borrowing capacity, and numerous cost and process efficiencies. 

The ccCFD service will initially cover the FTSE 100 stock list. The service is being built to be rapidly expanded to include a Pan-European ccCFD list and other securities in accordance with market demand and participant feedback.

Those that trade the pure equity market will see no difference to their service and the clearing of the equity market will remain unchanged from today. For those that clear both equity and ccCFD products there will be some impact to the equity margining results as LCH.Clearnet will recognises the risk offset between equities with ccCFDs wherever possible. 

For further information relating to products & services Chi-X offer please access their website: http://www.chi-x.com