Our Resources page is here to help you learn more about the challenges facing the clearing community and to understand the solutions that SwapClear is working on in partnership with our members and clients to overcome them. Here are a few of the thought leadership pieces we’ve been working on lately:
Clearing houses play a crucial role in ensuring global markets run smoothly. It is therefore vital that CCPs continuously evaluate their risk practices. LCH Group views and manages risk through four key lenses.
LCH has been clearing OTC derivatives since 1999. Join more than 450 buy-side firms in Europe and access the largest pool of liquidity available.
The shifting capital, regulatory and industry landscape has created some unexpected consequences for CCPs. In LCH's latest white paper, we examine liquidity concerns, central bank access, the issue of clearing house skin-in-the-game and the impact of these challenges on institutions in this new market paradigm.
LCH is engaged with the industry and regulators in an effort to clarify standards for portfolio margining across CCPs and inform derivatives market participants. In this paper we explain how the regulatory standard of "significant and reliably correlated" can be interpreted to recognise the benefits of both high and low correlations, and discuss the trade-offs between the level and stability of correlations.
LCH’s landmark white paper that started the global regulatory debate on standardised CCP stress testing. In this paper we propose a transparent framework to better compare the risk management procedures of CCPs on a consistent basis, as well as more easily determine aggregate member risk exposure.
While central clearing has been successfully used in derivative markets for years, global swaps clearing mandates are in the process of expanding adoption well beyond levels the market has ever seen. This paper explores whether or not this ultimately benefits the market as intended, whether it creates new risks and whether these potential new risks require a deeper analysis of the realities of clearing house operating models.
Recent debate on the issues of clearing house recovery and resolution has focused on a CCP's total loss absorbing capacity and the size of a CCP's own resources. The risks CCP members are exposed to are different to those of a CCP operator like LCH and the debate has blurred the distinction between the resources of the clearing members and those of the CCP itself. This paper outlines our approach to risk management, recovery; and resolution and presents key principles we believe should guide legislators' work in defining CCP recovery and resolution regimes globally.
Unmatched Efficiency and Freedom
As the first CCP to introduce inflation swap clearing, LCH continues to lead the way to even greater efficiencies and capital optimisation
SMART is SwapClear’s award-winning solution for managing initial margin requirements, enabling our members and their clients to simulate portfolio risk exposure in real-time. By allowing users to perform instantaneous and consistent "what-if" margin calculations, our clients are able to estimate initial margin requirements prior to clearing.
This briefing deconstructs, in plain English, phase two of the CFTC's Legally Segregated, Operationally Commingled (LSOC) rule to protect clearing member and client collateral.
In addition, LSOC: Principles and Implementation is our easy to understand briefing introducing LSOC and SwapClear's interpretation of it. This paper is intended to answer all of your LSOC questions.
Unsure of which interest rate swaps are mandated to clear under US clearing rules are which are not? Fear no more. Our Mandatory Clearing Checker can easily and immediately tell you which interest rate swaps are mandated for clearing in the US. Just submit the basic trade characteristics including swap class, currency, floating rate index, and tenor to receive a quick determination about your trade. Job done.
In September 2008, SwapClear successfully managed Lehman Brother’s $9 trillion interest rate swap default by implementing our unique default management process.
The default comprised more than 66,000 trades. Within three weeks, the default was fully resolved, well within the margin held and at no loss to other market participants.
LCH developed this process with the clearing members, who play an invaluable role in providing trade expertise and access to market liquidity during a default.
Stephen O’Connor, managing director at Morgan Stanley and chairman of ISDA, said, “The aim of the default management process is to manage the closeout of a member institution in an orderly fashion, with the minimum of disruption to the markets and without incurring credit losses at LCH or at other member firms. LCH and the bank members of the default management group executed on a well-tested plan in volatile markets and achieved these goals with distinction.”
The Bank of England noted that the ability of LCH to close out positions without using up all available margin “illustrates the ability of a clearing house to protect market participants from bilateral counterparty risk, even in the event of default of a major participant.” (The Bank of England’s Financial Stability Report, October 2008)