Essentials

Everything you need to know about clearing at CDSClear

Trade Submission

Submitting your index or single name CDS trade for clearing could not be simpler at CDSClear.

Whether you’re clearing a newly executed transaction or entering an existing trade into clearing through backloading, CDSClear makes managing your cleared portfolio easy. 

  • New trades: CDSClear sources new trades from major interdealer brokers, MTF/OTF platforms and off-SEF execution platforms.
  • Backloaded trades: Bilateral trades reported at DTCC can be backloaded through a weekly process (interdealer trades only) or a daily process.
  • Effective reporting and monitoring: trade statuses are fed back in real-time to Clearing Members through the LCH Clearlink API which offers real-time messaging and reports.
  • Reporting cleared trades with trade repositories: Cleared trades are registered in DTCC’s Trade Information Warehouse and reported to the CFTC via DTCC’s Global Trade Repository in the US. CDSClear reports its trade legs to the European regulators via UnaVista in Europe.

 

Trade Submission

 

Product type supported

Clearing Activity

Execution Venues

Index

Single Name

Inter-Dealer Clearing

Client Clearing

DealerWeb

Y

Y

Via MarkitWire*

N/A

GFI

Y

Y

Via MarkitWire*

X

BGC

Y

Y

Via MarkitWire*

X

Tullett Prebon

Y

Y

Via MarkitWire*

X

TradeWeb

Y

Y

Via Markitwire & Direct (ClearLink API)

Via Markitwire Direct (ClearLink API)

Creditex

Y

Y

Via MarkitWire/other e-gateways

N/A

Bloomberg

Y

Y

Via Markitwire & Direct (ClearLink API)

Via Markitwire & Direct (ClearLink API)

Sunrise Broker

Y

Y

Via MarkitWire*

X

ICAP Y Y Via MarkitWire* X
Compression

CDSClear Compression Offerings

CDSClear provides two different options for Clearing Members to compress (net) their trades in order to reduce the cleared gross notional managed by CDSClear:

  • Automatic Compression
  • Ad hoc Compression
     

Trade compression is optional and has no impact on the risk calculation, since the net position on an instrument remains identical prior and after compression. Clearing Members may decide unilaterally to compress their trades.

Prerequisites

  • Fungible trades - Clearing Members must have a set of cleared trades that can be compressed together according to the fungibility rules defined below.
  • Upfront settled - Only trades for which the upfront has already been settled (either bilaterally or through CDSClear) can be compressed together.
  • Access to the Compression Application of the Web Portal - Clearing Members must have an access to the Web Portal in order to configure the automatic compression settings and enable it to upload the ad hoc compression file.
     

Fungibility

Trades can be compressed together only when they are fungible, belong to the same trade account and when the upfront has been settled.

Compression is based on the criteria below.

Criteria for CDS compression

Compression Fungibility Criteria

Index

Single Names

Trade Account

Yes

Yes

Index / Reference Entity

Yes (RED9)

Yes (RED6)

List of fungible Reference Obligations (Ref Ob ISINs)

N/A

Yes

Maturity Date

Yes

Yes

Fixed Rate

Yes

Yes

Currency

Yes

Yes

Transaction Type

Yes

Yes

Automatic compression

The automatic compression can be enabled and configured on the LCH Group Portal by selecting the Compression Application.

The automatic compression can be enabled and configured with different settings

Frequency

  • Daily - Monday to Friday.
  • Weekly - Thursday. Thursday is the standard day for weekly compression as it will also include the trades resulting from the weekly backloading cycle.
  • By default, compression is disabled and set to “Never”. Once compression is enabled by the Clearing Member, whether it is set to Weekly or Daily and whenever a trade is cleared through backloading, compression will occur.
  • If clearing does not occur on a Thursday for the weekly cycle for any exceptional reason, weekly compression will still run on that given Thursday. In this case, it is suggested that Clearing Members change their compression settings the day prior to the clearing day to have simultaneous weekly cycle trade clearing and weekly compression.

Trade account (firm level)

  • Clearing Members that have several trade accounts either for their own activity or for their client activity, can decide that compression should be enabled only for a given set of trade accounts. Trades that are registered in different trade accounts cannot be compressed together.

  • A Clearing Member willing to apply compression for a given trade account will be able to select its client and select “Firm level”.

Desk-ID level

  • Trade segregation within a trade account - Clearing Members or their clients may be using desk-ID’s to manage their trades. Compression can run at desk-ID level, allowing trades with a given desk-ID to be compressed together. Desk ID becomes a fungibility criteria. Trades with no desk-ID will not be compressed together i.e. blank/empty field is not considered a single desk-ID

  • Setting exclusion rules - The configuration at desk-ID level works with the definition of exclusion rules. Clearing Members actually define the list of desk-IDs that will not be taken into account for compression. The other desks will be selected for compression. Finally, exclusion rules can be defined with a start and end date.

  • Case sensitivity - The case the desk-ID is expressed in is taken into account. Trades with differing desk-IDs (due to the case) will not be compressed together as they will be considered as belonging to two separate desk-IDs.When enabled, automatic compression runs immediately after the morning margin call at 8.55am CET.

In the event where an intraday trade has been cleared on D, the upfront is settled on D+1 at the morning margin call. If automatic compression is enabled, the trades will be compressed immediately after the morning margin call on D+1.

When automatic compression runs, the following sequence of events occurs:

  • CDSClear takes into account the current stock of cleared trades and the potential new trades that have recently been cleared following the margin call through daily or weekly backloading
  • CDSClear compresses the trades based on the settings defined above
  • This will result in CDSClear deleting all trades involved in the compression and creating one resulting trade per contract. In case of flat compression, no resulting trade is created and only deleted trades will be visible from a reporting perspective
  • CDSClear sends messages to the TIW to delete all trades impacted by the compression
  • CDSClear sends messages to the TIW to create the resulting trade. In case of compression following daily or weekly backloading, trades are cleared one by one, then they are compressed; but only the resulting trade will be registered in the TIW.

Ad hoc Compression

With ad hoc compression, Clearing Members can decide which trades should be compressed together and when. This option offers more flexibility for trade compression.

Ad hoc compression can be performed anytime during the CDSClear business clearing hours which is from 9.05am CET to 7pm CET.

When an ad hoc compression file is sent to CDSClear by a Clearing Member, the following sequence of events occurs:

  • CDSClear takes into account the trades listed within the ad hoc compression file, provided by the Clearing Member
  • This will result in CDSClear deleting all trades involved in the compression and creating one resulting trades per contract). In case of flat compression, no resulting trade is created and only deleted trades will be visible from a reporting perspective
  • CDSClear sends messages to the TIW to delete all trades impacted by the compression

CDSClear sends messages to the TIW to create the resulting trade.

 

CDSClear Closing Days and Operated Services

Trades sent to CDSClear outside this timeframe will be rejected and sender of the trade will be immediately notified by a rejection message. Trades are not parked and Members should re-send them during the opening hours of CDSClear service.

Margins are called on all TARGET2 business days. The TARGET2, London and New-York calendars are used for product related calculations and associated cash payments (upfront, coupons, credit event settlement), Variation Margin (VM) and Price Alignment Interest (PAI).

CDSClear closing days and operated services are mentioned below: