LCH.Clearnet is set to launch clearing services for Spanish government bonds and repos. The service, to be launched on August 9th, is one of a number of new asset classes LCH.Clearnet has turned to in order to diversify its product offering.
In July LCH.Clearnet announced that it had started constructing a clearing service for the over-the-counter wholesale London gold market in a joint initiative with the London Metal Exchange. In June the firm became the first to clear over-the-counter (OTC) container freight swap agreements. 50 year interest swap trades have also been cleared for the first time by LCH.Clearnets SwapClear subsidiary.
LCH.Clearnets drive for product diversification comes at a time where more traditional revenue streams are contracting. NYSE Euronext recently announced the launch of two new clearing houses in London and Paris by late 2012, severing its existing clearing arrangement with LCH.Clearnet. Xavier Rolet, the LSE CEO, has also announced that he was reviewing his firms relationship with the clearer.
The clearing of Spanish bonds and repos will be operated by LCH.Clearnets RepoClear service with trades settling at either Euroclear Bank or Clearstream Banking Luxembourg.
John Burke, director and head of fixed income, LCH.Clearnet said; Demand for us to launch this service has been growing steadily and market participants are keen for us to extend the benefits of our multi-market clearing and settlement service to Spanish debt.
Reduced counterparty risk, anonymity when trading and the significant efficiencies that balance sheet netting brings are just some of the benefits of this service. In time, clearing is also likely to contribute towards an increase in trading liquidity, as it has for other European government debt markets.
Spanish debt is already eligible as collateral in RepoClear GC service. The LCH.Clearnet group clears an estimated 85% of the cleared European government bond repo market according to the latest International Capital Market Associations European repo market survey.