ForexClear
The podcast is back for 2020 and Colin Lambert and Galen Stops immediately try to dampen new year’s spirits with a look at what was a pretty poor 2019 for the FX platforms. On a more positive note, Lambert thinks that 2020 could be a breakout year for two services in the FX industry as […]
LCH has announced that 2019 was a record year for volumes across multiple asset classes, including FX. Over $18 trillion in notional value was cleared by ForexClear, LCH’s FX derivatives clearing service, in 2019. This represents a 5% increase from the previous year. Of this total, $60.5 billion was client cleared notional, a sixfold increase […]
Clearing house LCH has announced that it is the first clearing house to integrate with FX Connect TradeNexus, State Street’s FX trading platform that provides exception-based automated matching, trade and settlement confirmation enrichment and third party messaging. Kate Lowe, managing director, global head of TradeNexus, says, “Uncleared margin rules are changing the way the market […]
LCH says that its ForexClear members have reduced their notional outstanding by $4.5 billion through the use of the service’s compression solution. Citi and Standard Chartered Bank are among the first participants to actively compress their trades at ForexClear.
Compression is the process by which clearing members and their clients can eliminate offsetting trades to reduce notional outstanding and the number of line items in a portfolio. Capital requirements such as those introduced under the Basel III leverage ratio have incentivised banks to reduce notional outstanding.
LCH has launched deliverable FX options clearing. The move incorporates the first physical settlement service for cleared FX products, which LCH has developed in collaboration with CLS.
FX options clearing will exist as part of LCH’s ForexClear service, which currently clears around $70 billion in average daily volume.
Paddy Boyle, global head of ForexClear at LCH, says: “Clearing FX options is an exciting milestone for LCH and the FX market. The launch of this service extends the benefits of clearing to more products and participants in the FX market, enabling them to benefit from the risk management, margin, capital and operational efficiencies of clearing. We’re delighted to partner with CLS to deliver this innovative new service.”
Although there are clear drivers pushing more FX products into central clearing, this is unlikely to have a significant impact on market structure, says Paddy Boyle, the head of ForexClear, LCH.
“The pressure to clear for banks that are subject to bilateral initial margin rules is very, very high and we have banks who tell us they’ve been cut off by other banks because they weren’t clearing,” he says.
That, explains Boyle, is one of the negative drivers towards central clearing, while on the positive side there are lower capital costs, lower initial margin requirements and fewer credit line restrictions for firms that choose to use clearing services. As a result, Boyle predicts that cleared FX volumes will increase “pretty significantly” going forward.
LCH says that its ForexClear service processed over $1 trillion in notional over the course of August, setting a new monthly record.
LCH says ForexClear has seen demand for its NDF clearing service “significantly increase” since the introduction of the uncleared margin rules in September 2016.
The service now has 28 clearing members and is seeing growing interest from buy-side clients, according to the clearinghouse.
In addition, the service ended August with a record $1.3 trillion outstanding notional and set a new daily record for notional cleared on 29 August, processing over $65 billion.
Michael Davie has been appointed global head of rates for LCH Group, effective immediately.
Daniel Maguire is currently the global head of rates and FX derivatives, but was recently announced as the new COO of LCH, in addition to these roles. Maguire will now transition the role of global head of rates to Davie, with Paddy Boyle continuing as global head of ForexClear.
In his new role Davie will report into Maguire and Martin Pluves, CEO of LCH.
He re-joins LCH after more than 18 months as head of rates services at London Stock Exchange Group (LSEG), which owns LCH. At LSEG Davie was tasked with developing the group’s approach to rates products and overseeing the launch of CurveGlobal, where he will remain on as chairman. Prior to that, Davie spent five years at LCH in a variety of senior roles.
Clearing house LCH says it is seeing “good momentum” in its ForexClear service heading into the second half of the year.
The firm says that as at May 2017 it has now cleared more that $10 trillion in notional value since inception. More pertinently, it says it has cleared more notional value ($3.8 trillion) in the first five months of 2017 than it did in the whole of 2016 ($3.2 trillion).
As well as a 200% increase in client accounts in 2017, LCH says 18 May 2017 set a new record for number of trades cleared, with 9,336 processed in a single day.
IHS Markit says that in 2017 it has processed a monthly average of 54,000 NDF contracts via Markitserv, a 920% increase compared to the same period last year.
“NDF clearing has seen strong interest as a response to the uncleared margin rules and other market factors,” says William Black, US head of OTC derivatives clearing at Credit Suisse. “We are proud to bring a scalable solution to this space and look forward to partnering with non-member clients as the market continues to develop.”
