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LCH.Clearnet eliminates over $100 trillion in notional in 12 months

First Published 22nd December 2015

Results highlight strong uptake of compression services by members and their clients.

Cameron Goh, LCH.Clearnet

Cameron Goh, LCH.Clearnet

"We expect to see growing momentum for use of these services as we extend the offering to other products in 2016."

LCH.Clearnet has announced that its SwapClear service has eliminated over $100 trillion in notional since 1 January 2015. This net reduction in notional outstanding has been driven by an acceleration of compression activity by SwapClear's members and their clients throughout the year.

SwapClear's notional outstanding reached an all-time high of $426 trillion in November 2013. Increased compression activity over the last two years has driven down notional outstanding to its present levels. Amidst record volumes of cleared trades in 2015, SwapClear compressed $323 trillion over the year, reducing the notional outstanding from almost $362 trillion at the start to the year to $254 trillion. This was achieved through its proprietary compression services, such as blended-rate, and those offered in partnership with TriOptima.

Members are currently able to compress interest rate swaps (IRS), forward rate agreements (FRA) and overnight index swaps (OIS) using the service. Plans to introduce compression services for inflation swaps and FX non-deliverable forwards (NDF) remain in place for 2016.

Cameron Goh, Head of Clearing Solutions, SwapClear and Listed Rates, LCH.Clearnet, said: "Eliminating over $100 trillion in net notional in a calendar year is an important milestone in our efforts to increase efficiency for the market. With the European mandate for clearing IRS fast approaching, we've seen a marked increase in cleared volumes at SwapClear.

"As the capital requirements under Basel III begin to bite, banks and clearing brokers are continually looking at ways to reduce exposures and drive down their clients' and their own notional outstanding. At the same time, buy-side firms are keen to make operational savings by managing their books as efficiently as possible. Compression enables our members and their clients to do just that by offsetting compatible trades, allowing them to achieve significant capital and operational efficiencies. We expect to see growing momentum for use of these services as we extend the offering to other products in 2016."