Compression to drive SwapClear's first ever annual drop in OTC IR derivatives notional outstanding

Report date

Amidst record cleared volumes, SwapClear's compression* surpasses $250 trillion YTD** of gross notional outstanding


LCH.Clearnet Ltd, the global clearing house, today announced that due to concerted effort by all market participants,  SwapClear is on track to achieve its first ever annual net reduction in notional outstanding in OTC interest rate derivatives. As of end of October, SwapClear had $406.9 trillion outstanding, whereas it started the year with $426 trillion. All this against a backdrop of record annual notional and trade flows cleared.  SwapClear clears over 90% of the cleared IRS market.

New capital pressures, such as those introduced by the Basel III leverage ratio, have incentivised financial institutions to reduce notional outstanding. In addition to capital efficiencies, participants stand to gain operational benefits from streamlining their portfolios. In 2014, SwapClear has compressed 1.95 million trades YTD** resulting in an overall reduction in its clearing members' and clients' number of trades outstanding from 3.2 million in January to 2.7 million as at the end of October. The launch of blended rate compression  in September 2014 has seen rapid take up and expanded the number of trades eligible for Solo compression.

Daniel Maguire, Global Head of SwapClear said: "Less really is more when it comes to notional outstanding. We've seen strong appetite for our compression services and those offered in partnership with TriOptima. Market participants recognise that streamlining portfolios reduces leverage ratio, capital and risk as well as boosting efficiency at an institutional and industry level. For the first time ever we expect to achieve a net reduction in the overall notional outstanding over the course of a year; despite a record average daily volume of trades and notional being cleared at SwapClear. This is a trend which we expect to see accelerate in 2015 as the market further embraces the clearing efficiencies and STP services on offer."

* Achieved through SwapClear's proprietary and third-party TriOptima compression service.

** As of end of October 2014

For further information

Rhiannon Davies, LCH, Tel: +44 (0)20 7426 7523

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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.