LCH to Launch LCH SwapAgent, a Centralised Service for the Non-Cleared Derivatives Market
LCH Clearnet – LCH, a leading global clearing house, announced that it will be launching a new service for the non-cleared derivatives market. LCH SwapAgent will benefit from LCH’s expertise in serving and managing risk for the cleared rates & FX derivatives market, providing market participants with a number of solutions designed to materially improve standardisation, efficiency and simplicity in the bilateral derivatives market.
LCH SwapAgent will act as an independent calculation agent, facilitating the calculation and exchange of bilateral margin and settlement payments, but will not become the central counterparty to the trade. LCH SwapAgent’s customers will be able to benefit from services including CSA standardisation, end-to-end trade life cycle management, independent valuation and risk calculation, dispute elimination, payment netting and compression. The service, which is expected to go live in H1 2017, will be available for all market participants trading non-cleared OTC interest rate derivatives. 11 dealers have confirmed their support for LCH SwapAgent including Bank of America Merrill Lynch, Barclays, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Morgan Stanley and RBS.
Nathan Ondyak, Global Head of LCH SwapAgent, LCH, said: “We believe that an efficient bilateral market is critical to the functioning of the broader OTC market. SwapAgent increases the efficiency of non-cleared derivatives trading by extending the centralised clearing infrastructure – standardised document terms, trade processing, margining and payment processing – without requiring novation to a central counterparty or a change to the underlying trade terms.”
Will Roberts, Head of Global Rates Trading, Bank of America Merrill Lynch, said: “Due to the introduction of the bilateral margin rules the market is increasingly looking for ways to reduce the costs of bilateral trading. Using LCH SwapAgent provides an opportunity to simplify our bilateral post-trade processes and meet the emerging obligations in a more efficient manner.”
Daniel Maguire, Global Head of Rates & FX Derivatives, LCH, added: “We have invested a tremendous amount of effort consulting with market participants and considering how to apply our track record of innovation and provenance in cleared OTC interest rates & FX to the OTC bilateral market. LCH SwapAgent is a natural extension and complement to our existing cleared services.”
Phase 5 of the uncleared margin rules (UMR) took effect from September 2021.
Temporary equivalence is set to expire on June 30 2022.
IRS trading volumes have fragmented without an equivalence agreement.
Phase 5 of the uncleared margin rules came into effect on 1 September.
Triparty repos can be executed across U.S. Treasury securities to central clearing.