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LCH.Clearnet Launches Clearing for OIS

European clearing house, LCH.Clearnet has launched clearing for overnight index swaps (OIS) contracts through its over-the-counter interest rate swap clearing service, Swapclear.

An OIS is a fixed or floating interest rate swap with the floating leg tied to a published index of a daily overnight rate reference such as the sterling overnight interbank average (Sonia) or the euro overnight interbank average (Eonia).

Providing clearing to the OIS market, which is a major benchmark for short-term interest rate swaps, will increase interbank liquidity by mitigating counterparty risk, increasing trading capacity and reducing settlement costs, LCH.Clearnet says.

Four currencies – USD, GBP, EUR and CHF – will initially be cleared, though this may be extended. The contracts are for tenors of up to two years and trades are accepted through MarkitWire, the electronic trade confirmation network for the OTC derivatives markets.

Joe Reilly, director of Swapclear, says:”Managing counterparty risk has never been more important and, as a result, we have seen a remarkable growth in demand for our Swapclear service.”

In May, LCH.Clearnet announced that it would be broadening Swapclear to the buy-side community, significantly increasing the proportion of financial companies able to access clearing in the rates market (Squawkbox, June 1).

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