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.
For the first time, trades registered in LCH’s SwapAgent service were successfully compressed in TriOptima’s multilateral USD/EUR cross-currency swap compression cycle. Using its triReduce compression service, €4.5 billion in notional of trades registered in SwapAgent were compressed. During the run, SwapAgent and non-SwapAgent trades were blended together to achieve better benefits from the compression.Compression is the process by which members 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.