Prepare to get caught up in a web of savings. Our intrepid new portfolio margining service analyses your OTC and listed rates portfolios to locate margin offsets and potentially delivers collateral efficiencies back to you.
LCH Spider is an automated tool that analyzes your listed interest rates portfolio to find trades that are eligible to offset against correlated positions in your OTC interest rates portfolio.
Once Spider locates these offsetting positions, it transfers the listed trades into your OTC portfolio. The resulting margin savings are credited back to your LCH account, saving you money while also reducing the risk across your aggregate rates portfolio.
But why try to describe it when you can actually see the Spider in action? Click the video below to watch how Spider weaves its magic.
When let loose, Spider first analyses your listed portfolio for trades that are eligible for offsetting. It then runs a patent-pending modified simplex algorithm to pinpoint which eligible trades correlate and provide risk reduction across your aggregate portfolio.
These listed trades are then transferred to your OTC portfolio for offsetting. Your are notified, and the resulting margin savings are credited to your account.
Single default fund
To enable LCH Spider to go to work, a single rates derivatives default fund with two margin classes has been created. Inclusion in margin class is based on where cleared positions are being margined, with a default waterfall structure in place to reduce exposures between margin classes.
We are connected with CurveGlobal to include their eligible futures contracts, and are open to working with additional execution venues in line with our Open Access philosophy.
What trades are eligible?
Short Term Interest Rate Futures (STIRs) are now available for offset against all cleared OTC products. Bond Futures will follow (subject to regulatory approval).
LCH Spider is available to both clearing members and their buy-side clients. The only requirement to enrol in the service is that a user must be eligible to clear both listed and OTC rates at LCH.
Buy-side clients opting in to Spider are also required to use the same clearing member for both product types. And that’s it.
Once you have opted into Spider, there are no changes to how you execute or clear trades at LCH. The process is completely seamless.
Click below for a more details on how to put Spider to work cleaning up your rates portfolios.
Looking for a little more technical information on exactly how Spider works, the technology underpinning the tool and the risk management processes across the listed and OTC portfolios?
All great questions. You can find some great answers by clicking through to the LCH Spider brochure below.