LCH Clearnet to Offer Default Swaps Clearing for Single NamesNandini Sukumar
LCH.Clearnet Group Ltd. said it will clear single name credit-default swaps trades for European clients, expanding the range of assets it covers.
The London-based clearinghouse will process the swaps with its CDSClear service, covering 187 single name credit-default swap. Customers will be able to offset risk and collateral between the single name contracts and existing indexes because LCH will offer portfolio accounts, potentially reducing the amount of margin they’ll have to post, the company said in an e-mailed statement.
The U.S. Dodd-Frank Act requires clearing for most swap contracts, while international regulations under the Basel III accords encourage the use of clearinghouses for the derivatives through favorable capital treatments. The European Commission is also working on legislation, called the European Market Infrastructure Regulation, that would govern most aspects of clearing.
Clearinghouses operate as central counterparties for every buy and sell order executed by their members, who post collateral, reducing the threat from a trader’s default.
LCH, now majority-owned by London Stock Exchange Group Plc, operates CDSClear and also offers a service to process foreign-exchange swaps. It is also the world’s largest interest-rate-swap clearinghouse.
The world’s largest swaps dealers including JPMorgan, Deutsche Bank AG and Barclays Plc are moving much of the $22 trillion privately negotiated credit-derivatives market to clearinghouses to reduce counterparty risk.