SwapClear for Clients

Since the default of Lehman Brothers, there has been a rapidly growing demand from the buy-side for access to OTC clearing services.  LCH.Clearnet has responded to this demand by extending SwapClear to the buy-side in a unique construct designed to meet the buy-side’s needs, launching global client clearing in December 2009 and a US Futures Commission Merchant (FCM) model in March 2011. SwapClear's US FCM model providing an alternative access approach through any of the 12 US based FCMs connected to the service.

Benefits to Clients

• Unrivaled Liquidity

  Since 1999, we have cleared more than 1.8 million OTC interest rate swaps, $300 trillion notional, and compressed more than $80 trillion (as of November 2011). Our massive liquidity results in more accurate risk assessment, better systems, deeper experience and superior pricing for you. View our clearing volume report here.

• Global Power, Local Expertise

  With offices on Wall Street, in London, and in Washington, DC, we are highly attuned to regional client needs and regulatory implications as they happen. In this way, we continue shaping the industry, as we have for decades.

• Rigorous Risk Management

  SwapClear has a proven track record of mitigating risk for its users for more than 12 years. Our success is due to SwapClear’s very stringent membership criteria and rigorous back testing, including worst-case losses based on historical scenarios over the previous five years. As a result, the derivatives community has recognized us for our thought leadership by adopting many of our risk management standards. Read about our clearing service in detail here.

• Breadth and Depth

  Since 1999, SwapClear has grown to include 61 members with a system that supports 17 currencies—some with tenors out to 50 years. We offer more clearable OTC interest rates swap products than any other CCP, covering 95% of the plain vanilla market. LCH.Clearnet is primarily regulated by the U.K.'s Financial Services Authority (FSA) as a Recognised Clearing House. It has also been regulated as a Derivatives Clearing Organization (DCO) in the United States by the Commodity Futures Trading Commission (CFTC) since 2001.

• Battle-Tested Experience

  LCH.Clearnet is the only clearing house to have successfully handled a significant OTC swaps default when it resolved Lehman Brothers’ $9 trillion interest rate swap default in 2008. Read the Lehman case study here.

• Interactive Partnership

  Active collaboration with clients on both the buy- and sell-sides allows us to continually refine our systems and methodologies so that we’re clearing what you need, the way that you need it. Our latest release on December 5, 2011, addressed connectivity, compression, collateral and portability.

• Broad-Based Ownership Structure

  We clear the market, because we are the market. LCH.Clearnet is an industry-owned clearing house with advisory committees comprising both buy- and sell-side constituents. The 99 shareholders, two of which are exchanges, each have a 5% voting cap. Read more about LCH.Clearnet here.

Client clearing trade process

To submit a trade for clearing, the client and executing  broker will affirm the trade via MarkitSERV2. The trade will subsequently be ‘given up’ by both sides to the client’s chosen SwapClear clearing member3 who will clear the trade through LCH.Clearnet.

The execution and subsequent give-up process will be governed by the documents between the executing broker, client and SwapClear clearing member. All subsequent trade events, such as novations and partial novations, will be handled by the SwapClear clearing member without any involvement from the executing broker.

Block Trades and Fund Allocations.

The give-up process can include fund splits. This allows a fund manager to negotiate a single block price with an executing broker and subsequently enter the allocations into MarkitSERV. The SwapClear clearing member then clears the  client trades as allocated.

2 Clients will either use the Markit Wire interface directory or the MarkitSERV portal, which will be available shortly after the launch of the service.

3 Clients may appoint one or more SwapClear clearing members.

SwapClear for Clearing Members