LCH.Clearnet is set to open up its interest rate clearing service SwapClear to U.S. clients in late 2010.
The London-based clearing house has faced a turbulent year after difficulties with two major clients. In May NYSE Euronext announced plans to sever its existing clearing arrangement with LCH.Clearnet, and Xavier Rolet, the LSE CEO, issued plans to review its relationship with the clearer. Standard and Poors also place LCH.Clearnet on creditwatch with negative implications concerning LCH.Clearnets future earnings power.
By offering Swapclear via a Futures Commission Merchant model to U.S. clients, LCH.Clearnet hopes to tap into potential U.S. regulation that will force many derivatives through clearing houses. Established in 1999, SwapClear already clears over 40% of the global IRS market.
The current SwapClear service will offer access to LCH.Clearnets IRS clearing service and portability of client collateral and positions. Arrangements will be governed by New York law and initial margin collateral will be held in the U.S.
LCH.Clearnet has also begun using the overnight index swap (OIS) rate curves to discount its $218 trillion IRS portfolio.
Roger Liddell, CEO, LCH.Clearnet said: “This extension of the SwapClear service reflects our commitment to customer choice. We want to provide customers with the access model that best suits their needs, whilst preserving the integrity and risk mitigating benefits of SwapClear. This development reflects feedback from key customers and the broad thrust of proposed legislative changes.