LCH’s position in respect of ISDA’s supplemented EONIA definition

Dear SwapClear Users[1],

The LCH group (“LCH”) and the SwapClear business strongly support the ongoing industry-wide moves to reform many of the benchmarks[2] which, when used in derivatives contracts are, or may become, no longer sufficiently robust or fit for purpose.

Further to LCH’s statement in December 2018 regarding its general approach to the adoption of ISDA’s fallback approaches [3], ISDA has made available a pre-publication draft of a revised and supplemented definition for EONIA [4] which incorporates an explicit fallback to Modified EuroSTR, being EuroSTR plus 0.085%. As a result, we are pleased to announce the following approach for LCH-cleared EONIA contracts:

1. SwapClear is providing clearing eligibility for new EONIA contracts incorporating the supplemented EONIA definition from the date on which it is published by ISDA, being 1st October 2019;
2. From this date, all newly registered EONIA SwapClear contracts will incorporate the supplemented EONIA definition;
3. On 1st October 2019, all outstanding cleared EONIA SwapClear contracts will be amended so as to incorporate the supplemented  ISDA definition;
4. Based on the proposed implementation approach, there are no operational or technological changes associated with our adoption of this supplemented definition;
5. As a separate but related matter, all prior communications from LCH relating to the coincident changes in publication schedule of EONIA remain on track for delivery as planned.

We continue to believe it to be in the interests of the derivatives market as a whole that these supplemented definitions, on which ISDA has consulted so broadly, are adopted as quickly and as comprehensively by the market as is practicable.

Should you have any comments or questions, or if you require further information, please contact philip.whitehurst@lch.com or david.horner@lch.com.

Kind regards

Membership Sales & Relationship Management, Rates

[1] For the purpose of this announcement, “SwapClear Users” means SwapClear Clearing Members (including FCMs) and their clients

[2] For example, FSB, July 2014 onwards ( http://www.fsb.org/what-we-do/policy-development/additional-policy-area… ); Andrew Bailey, FCA, July 2017 (https://www.fca.org.uk/news/speeches/the-future-of-libor ) 

[3] https://www.lch.com/membership/ltd-membership/ltd-member-updates/lchs-p…

[4] https://www.isda.org/a/cm0TE/200919_EUR-EONIA-Compound-FRO-Amendment-for-2006-ISDA-Defs-pre-publication.pdf