LCH CDSClear Begins Client Clearing of Credit Index Options

  • BNP Paribas and J.P. Morgan are the first banks to offer client clearing of credit index options through CDSClear
  • LCH CDSClear offers the broadest credit product coverage of any clearing house

LCH, a leading global clearing house, announced that BNP Paribas and J.P. Morgan are the first banks to offer client clearing of credit index options at CDSClear, enabling greater access to the significant funding capital and operational efficiencies available through clearing.

Client clearing of credit index options is a significant development that brings the benefits of clearing these products to more of the market, including buy-side firms. CDSClear offers the broadest credit product coverage and is the leading clearing house for index options by notional cleared. In 2021, CDSClear cleared a record €163 billion of notional in iTraxx Options representing a YoY increase of 133%.

Through multilateral netting, clearing reduces gross bilateral counterparty exposures down to a single net exposure to the clearing house and reduces operational risk by enabling a single expiry/exercise instruction per instrument. CDSClear first launched credit index options on iTraxx Europe Main and Crossover indices in 2017 and in 2020, expanded its offering to include Options on CDX.NA IG and CDX.NA HY underlying indices.

Frank Soussan, Global Head of CDSClear, LCH said: “LCH was the first credit clearing house to offer credit index options and since launch we’ve built up a significant liquidity pool in that product. We’re delighted to broaden the risk management benefits and efficiencies of clearing to include clients. This part of our continued expansion and innovation at CDSClear to support the market and meet the needs of our customers. We look forward to welcoming more clearing brokers onto the service.”

Gaspard Bonin, Deputy Head of Derivatives Execution & Clearing, BNP Paribas, said: “We’re proud to be the first bank successfully live with client clearing of credit index options at CDSClear. This new service further enhances the derivatives clearing solutions we can provide our clients, helping them manage their Credit derivatives portfolios more effectively.”

Nick Forgan, MD, J.P. Morgan, said: “As the first US bank to offer client clearing via LCH CDSClear, we’re delighted to support credit index option client clearing at CDSClear. Clearing provides our clients with an efficient way of mitigating counterparty risk with additional operational benefits. This new service from LCH expands those benefits to credit index options, and increases the netting opportunities available to our customers.”

Credit index options available for client clearing at CDSClear are iTraxx Main 5Y OTR and OTR-1 Series, iTraxx Crossover 5Y OTR and OTR-1 Series, CDX.IG 5YR OTR and OTR-1 Series, CDX.HY 5YR OTR and OTR-1 Series.

Source: LCH

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