LCH has extended its RepoClear service to offer clearing for cash and repo trades on German government securities via its continental Europe-based entity LCH SA.
The move increases LCH SA’s existing service, which already clears trades on Italian, French and Spanish government securities, and aims to provide greater choice for members in where to clear their trades.
The availability of clearing trades on German debt will also continue to be offered through LCH, the Group’s UK clearing house.
“As a clearing house we are consistently looking for ways to reduce our members’ risk. Netting is a very efficient way of reducing banks’ balance sheet usage and mitigate potentially costly capital requirements,” said Christophe Hémon, CEO at LCH SA.
The new offering covers trades on German government and regional debt as well as Jumbo Pfandbriefe.
Members clearing these products will be able to net their positions with other European transactions cleared at LCH SA and settled through TARGET2-Securities (T2S), the pan-European platform for securities settlement.
“The implementation of T2S brings with it an opportunity to expand the number of European trades eligible for balance sheet netting, providing greater operational and capital efficiency for our members,” said Hémon.
Members are able to use Clearstream Bank Frankfurt or Euroclear France as their central securities depository or Euroclear Bank as a settlement agent.
“German government debt repo clearing in LCH SA is a welcome development as this initiative offers the choice between clearing venues and the ability to improve operational efficiency,” said Peter Fejfer Nielsen, managing director and head of EMEA finance desk at Citi.
“It is an important step to incorporate T2S across European government debt markets and will improve settlement and support our client activity.”