Articles tagged by LCH
Graham Wright has joined the LCH Limited board as an independent non-executive director. Wright is currently the chief information security officer and global head of digital risk for National Grid.
Prior to this, he has held a number of senior roles relating to cyber security and intelligence for the UK’s Ministry of Defence and in the private sector. These positions follow a career as an operational pilot and senior officer in the Royal Air Force.
Lex Hoogduin, group chairman of LCH, comments: “I am delighted to welcome Graham as an independent non-executive director to the LCH Limited board. He brings exceptional knowledge of the technology and operations space and the Board will benefit greatly from his experience in this area.”
Clearing house LCH says its ForexClear service has seen 10 entities turn to actively clearing FX non-deliverable forwards in the past six months and that it has experienced a “significant” rise in cleared notional and trade count in 2016, with over $220 billion in notional cleared to date in September 2016.
As of 23 September, the firm says over $1 trillion in notional has been cleared in 2016.
“The uncleared margin rules that are coming into force across the world have been a catalyst for driving eligible and appropriate derivatives trades towards central clearing,” says Daniel Maguire, LCH’s global head of rates and FX derivatives.
LCH has announced today that Commonwealth Bank of Australia (CBA) has become its first Australian Protected Payments System (PPS) bank.
Having an Australian PPS bank enables LCH to make and receive Australian dollar payments in the local time zone.
The PPS system is the method by which LCH calls and pays cash margin to its clearing members. As part of the membership criteria for LCH, members are required to maintain a PPS bank account. Overseen by the Bank of England, PPS has been in operation in London for over 20 years, and also operates in New York.
Clearing house LCH is moving into the non-cleared space with the launch of LCH SwapAgent, a new service for the non-cleared derivatives market. The clearing house says LCH SwapAgent will provide market participants with a number of solutions designed to materially improve standardisation, efficiency and simplicity in the bilateral derivatives market.
It will act as an independent calculation agent, facilitating the calculation and exchange of bilateral margin and settlement payments, but will not become the central counterparty to the trade.
The five clearinghouses under US jurisdiction have passed the Commodity Futures Trading Commission’s (CFTC) first stress test.
The purpose of the test was to assess the impact of a hypothetical set of what the CFTC says is an extreme but plausible market scenarios across multiple clearinghouses and their clearing members.
The analysis included five clearinghouses registered with the CFTC located in the US as well as in the UK, they are CME Clearing, ICE Clear Credit, ICE Clear Europe, ICE Clear US, and LCH Clearnet. It encompassed cleared futures and options, interest rate swaps, and credit default swaps.
The analysis included the largest clearing members (measured by margin deposited) at each clearinghouse.
LCH is seeing the benefit of the push towards central clearing of derivatives, the clearinghouse announcing its SwapClear service cleared record volumes of interest rate derivatives in 2016.
LCH says it processed over $665 trillion in notional over the course of the year, representing an annual increase of 25%. “Both members and their clients increased their flows through LCH, with the buy side clearing a record $139 trillion in notional at SwapClear,” the firm says. “These volumes were driven by customers clearing new products, such as inflation swaps, as well the continuing effects of regulatory change.”
Neil Walker is standing down as a non-executive director of LCH’s SA and Group boards, effective immediately, in order to focus on executive commitments elsewhere.
Walker has been a non-executive director for LCH since 2012 and has served as a member of LCH’s risk committees.
Lex Hoogduin, group chairman of LCH, says: “Over his five-year tenure, Neil has made significant contributions to both the SA and Group boards and its risk committees. On behalf of the Board and LCH’s executive team, I would like to express my gratitude for Neil’s commitment and the insight that he’s provided to LCH during this time. We wish him every success as he continues to pursue his executive career.”
Clearing house LCH has announced that its first European buy-side client is now live on CDSClear with Amundi now clearing credit default swaps (CDS) at via its clearing broker BNP Paribas.
LCH says it has seen activity on its service grow significantly in recent months and that CDSClear now has 13 active clearing members. From Q2 2017, end-users trading CDS will be able to connect via two additional clearing brokers, which will be offering clearing through LCH SA, the firm adds.
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.
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.
LCH has signed binding terms with Euronext NV (Euronext) for the continued provision of clearing services for listed financial and commodity derivatives with LCH SA, the Group’s continental European operating subsidiary.
The agreement, which is expected to be finalised in Q4 2017, covers the clearing of financial derivatives and commodity derivatives for a period of 10 years.
Under the terms of the agreement, LCH SA and Euronext will also work together to achieve a targeted range of reduction in clearing fees of 5% to 15% with effect from January 2019, depending on each specific product and service. The precise quantum of the reduction for allocation to each derivative product line will be refined in consultation with customers.
LCH has introduced a new type of client account within its SwapClear service.
The account allows buy side clients to deliver collateral directly to the clearing house and to retain beneficial title to it. Segregation at an International Central Securities Depository (ICSD) ensures that such securities collateral remains client-specific.
This aims to increase operational efficiency and also eliminates the transit risk arising where a client delivers collateral to the clearing house via its clearing member.
JP Morgan is the first clearing member, and Aviva Investors is the first buy side client, to use this new account type. BNP Paribas and HSBC have also confirmed their readiness to support the new account structure.
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.
Daniel Maguire has been appointed CEO of LCH Group, with immediate effect.
The appointment follows Suneel Bakhshi’s decision earlier this summer to step down as CEO after four years in the role.
Maguire has been working as the COO of LCH since April 2017, he has been involved in LCH’s SwapClear service from inception and during his 16-year career at LCH has been responsible for risk management, default management, product management, regulatory strategy, programme delivery, sales, marketing and operations.
In 2014, after returning from four years in the US where he started and built out LCH’s North America operations and led SwapClear’s client clearing franchise, Maguire took on the role of global head of SwapClear and subsequently took responsibility for LCH’s ForexClear and listed rates services.
They may both have been a long time in the pipeline, but the wait for CME and LCH’s introduction of OTC FX options clearing services is nearly over. Yet with both due to launch before the end of 2017, just how much appetite is there likely to be from the prime services sector to support these initiatives? Nicola Tavendale writes.
While there are many different ways institutions can try to reduce their capital costs, clearing is by far the most efficient, according to Paddy Boyle, head of ForexClear at LCH. And even before the advent of the uncleared margin rules, there were already significant benefits to clearing non-deliverable forwards (NDFs), both in terms of enhanced risk management and obtaining operational and capital efficiencies, he adds. “Since the uncleared margin rules were implemented in September 2016, clearing has become a much bigger priority for many firms,” Boyle says.
Galen Stops takes a look at whether the predictions of FX moving towards a centrally cleared model might finally be coming true.
Central clearing for FX has endured a number of false dawns in recent years. As long ago as 2011, Profit & Loss published an article, “FX Clearing – Are You Ready?” in which it was argued that Dodd-Frank was likely to drive FX options and NDFs products into clearing.
Then back in the first quarter 2014, staff at the US Commodity Futures Trading Commission (CFTC) indicated that the guidelines for the mandatory clearing of FX derivatives products, which included NDFs could be finalised within weeks. Indeed, Profit & Loss reported in mid-June 2014 that the CFTC was poised to fire the starting gun for mandatory FX clearing.
John Horkan has been appointed as LCH Group chief operating officer (COO), effective immediately. He assumes this role in addition to his current responsibilities as LCH head of North America and will continue to be based in New York.
Horkan will report to Daniel Maguire, CEO of LCH Group and will work in partnership with the CEOs of LCH’s regulated CCPs, and the senior management team, to deliver the group’s integrated global strategy across services and entities.
Horkan joined LCH Group in 2012.
IHS Markit has announced new trade technology solutions from its MarkitServ unit that enable full automation of settlement and margin payments in the cross-currency swaps market.
Cross-currency swaps expose counterparties to settlement risk due to the high value of initial and final principal exchanges that take place in what was recently measured to be a $30 trillion market. New automation, workflow and integrations between MarkitServ and both CLS and LCH SwapAgent enable firms to automate swaps payments, including initial and final notional exchange settlements through CLS and variation margin payments with LCH SwapAgent.
LCH SwapAgent, a service for the non-cleared derivatives market, has processed its first cross-currency basis swap.
The first trade was conducted between Credit Suisse and Deutsche Bank and was a EUR/USD cross-currency basis swap. The trade was brokered by Icap and processed through MarkitSERV.
This represents the first non-cleared trade to be transacted as LCH STM, SwapAgent’s settlement-to-market legal and operational framework. LCH STM facilitates full and final daily NPV settlement, rather than collateralisation by way of exchange of variation margin, and the netting of such settlement and contractual trade cashflows.
LCH says it has cleared a total of $745 million of G10 FX NDF currency pairs less than one month after the products went live on its ForexClear service.
The new NDF currency pairs reflect the five most actively traded G10 currencies: Australian dollar, euro, Japanese yen, pound sterling and Swiss franc, against the US dollar. LCH says that expanding ForexClear’s coverage to incorporate these pairs increases opportunities for capital optimisation by increasing the number of products eligible for clearing at LCH.
Clearing house LCH has announced record volumes across multiple clearing services in 2017, with FX leading the way by registering the greatest pace of growth across established products.
The firm says its equities, fixed income, and OTC derivatives clearing services all surpassed previous years’ clearing activity, with growth driven by the roll-out of new products, effects of regulatory change and the onboarding of new customers across the world.
LCH’s FX derivatives clearing service, ForexClear, delivered very strong growth in 2017.
Following the announcement that CME Group is to buy OTC platform operator and post trade services provider NEX Group for $5.4 billion, Galen Stops, raises five important questions that both the parties involved in the deal, and the wider FX market, probably need to consider. Is it good value? Could there be more deals for OTC platforms? Do OTC platforms need scale to survive? Will this deal lead to more futures trading? And does this deal represent competition for LCH?
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 has obtained recognition as a central counterparty from the Banco de México.
The recognition for LCH’s SwapClear Service is effective from 22 June 2018 and provides a greater choice of CCPs to those participants affected by the Mexican clearing mandate.
With this recognition, LCH can expand clearing to Mexican-domiciled market participants to support their interest rate derivatives trading activity.
LCH will continue to offer clearing to global participants for Mexican Peso-denominated interest rate derivatives as one of the 21 currencies offered by SwapClear. LCH clears for members and their clients based in 55 countries.
LCH is now actively clearing trades on behalf of a Mexico-domiciled participant.
BBVA Bancomer completed a cleared Mexican peso denominated TIIE interest rate swap, with BBVA SA Madrid acting as the clearing broker.
The transaction marks the first time a Mexican participant has used LCH SwapClear, following LCH’s recognition as a Foreign Central Counterparty (CCP) by Banco de México earlier this month.
John Horkan, LCH Group COO and head of North America, says: “We’re excited that BBVA Bancomer has become the first Mexican participant to clear its interest rate derivatives at SwapClear. This milestone swiftly follows LCH’s recent recognition as a Foreign CCP by Banco de México, allowing Mexican entities the benefit of accessing the global liquidity available in SwapClear.”