LCH.Clearnet enhances SwapClear compression offering

Report date
  • $1.9 trillion in notional eliminated in first blended-rate compression run for Forward Rate Agreements at SwapClear
  • Enhancement drives further capital and operational efficiencies for market participants
  • $250 trillion in notional eliminated in SwapClear to date in 2015 through proprietary and third-party compression services, contributing to a net notional reduction of $93 trillion  

LCH.Clearnet Ltd, the global clearing house, today announced it has extended SwapClear’s blended-rate compression offering to enable members and their clients to compress Forward Rate Agreements (FRAs). The first blended-rate compression run for FRAs saw $1.9 trillion eliminated. This latest enhancement to SwapClear’s compression offering has the potential to reduce notional outstanding of FRAs in SwapClear by up to 50% and number of trades outstanding by up to 70%. As of October 2015, SwapClear has over $66 trillion notional outstanding in FRAs.

FRAs are typically used to hedge interest rate risk around certain rate reset dates. As a result they are well-suited to blended-rate compression, which enables trades with different interest rates but the same payment dates to be compressed.

Cameron Goh, Head of Clearing Solutions, SwapClear Product Management, LCH.Clearnet, said: “Stringent capital requirements are driving banks to take a close look at their notional outstanding. FRAs make up a large portion of our members’ cleared interest rate derivatives so expanding our blended-rate compression offering will significantly reduce the notional outstanding in SwapClear. The encouraging volumes we compressed in the first run for FRAs demonstrate the continued drive towards capital efficiency amongst our members and their clients.”

In addition to compressing FRAs, market participants are now also able to compress Variable Notional Swaps VNS using SwapClear’s solo compression service.

For further information

Rhiannon Davies, Tel: +44 (0)20 7426 7523
Lucie Holloway, Tel: +44 (0)20 7797 1126

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About LCH.Clearnet

The LCH.Clearnet Group is a leading multi-asset class and multi-national clearing house, serving major exchanges and trading platforms as well as a range of OTC markets.

LCH.Clearnet’s world-class risk management framework provides exceptional levels of protection to international markets, as has been proven through the management of past defaults. As demand for robust clearing services continues to grow, LCH.Clearnet is committed to achieving the highest standards of risk management across all asset classes cleared.

LCH.Clearnet Group is majority owned by London Stock Exchange Group (LSE.L), a diversified international exchange group that sits at the heart of the world's financial community.