LCH.Clearnet last Tuesday launched its Swapclear Futures Commission Merchant (FCM) service for US interest rate swap clients. Morgan Stanley says it cleared some of the first trades for its US clients on the day of launch.
Clients are able to access the service through any of the 12 FCMs already connected to it. Last Wednesday, LCH said that six clients had cleared executed over-the-counter IRS trades on Swapclear in a variety of maturities and currencies, including USD, EUR and GBP. Morgan Stanley says that it executed the transactions through Tradeweb’s electronic execution platform and transmitted to LCH via MarkitWire, claiming they were the first transactions to be executed and cleared in this manner.
“US clients are increasingly focused on how the regulations resulting from the implementation of the Dodd-Frank Act will affect them,” says Floyd Converse, head of US sales and marketing at LCH. He says that features of the service include flexible payment dates, Libor indices and OIS discounting for 14 currencies with tenors out to 50 years. These are available within the protections of an FCM framework and regulated by the CFTC.
LCH says clients will benefit from reduced counterparty risk, default protection, proven default management expertise, portability of client collateral and positions and initial margin collateral held solely in the US and fully subject to US law and the Commodity Exchange Act.
Swapclear was established more than 11 years ago in Europe and has cleared over 1.5 million OTC IRS trades, approximately 35% of which are US dollar denominated. Its product range covers over 90% of the plain vanilla IRS market, and will be expanded later this year to cover US dollar denominated amortising swaps.
The 12 FCMs connected to the service are: Bank of America Merrill Lynch; Barclays Capital; BNP Paribas Securities Corp; Citigroup; Credit Suisse Securities USA; Deutsche Bank Securities.; Goldman Sachs; JP Morgan Futures; Morgan Stanley; Nomura Securities; RBS Securities and UBS Securities. In addition, HSBC Securities USA has confirmed its intention to join shortly as an FCM.