LCH Launches Deliverable FX Options Clearing

  • LCH Ltd pioneers clearing of deliverable FX Options
  • Settlement model developed in collaboration with CLS
  • Barclays, Citi and J.P.Morgan the first participants to use the service

LCH, a leading global clearing house, today announced that it has launched deliverable FX options clearing. Barclays, Citi and J.P. Morgan are among the first participants to use the service, with further banks expected to shortly start clearing the product.

The move incorporates the first physical FX settlement service for cleared FX products, which LCH has developed in collaboration with CLS. Clearing FX Options extends LCH’s ForexClear service, a leading clearer of FX NDFs, clearing  around $70 billion in average daily volume.

Paddy Boyle, Global Head of ForexClear, LCH, said: “Clearing FX Options is an exciting milestone for LCH and the FX market. The launch of this service extends the benefits of clearing to more products and participants in the FX market, enabling them to benefit from the risk management, margin, capital and operational efficiencies of clearing. We’re delighted to partner with CLS to deliver this innovative new service.”

Alan Marquard, Chief Strategy and Development Officer, CLS, said: “This initiative marks a significant step forward for the global FX community. By working with LCH, we will reduce settlement and counterparty risk while improving efficiencies for those operating in the OTC cleared FX market.”

Andrew Batchelor, MD, Global FX Business Manager, Barclays, said: “The strong benefit of clearing deliverable FX Options has been apparent since the introduction of the uncleared margin rules in 2016. LCH has overcome enormous complexity in development of the product through innovative thinking and strong partnerships with CLS and members. We are delighted to be a part of the launch of this ground breaking solution for the broader market.”

“The launch of FX Options clearing capabilities unlocks significant new opportunities for market participants by enabling  operational efficiency while optimizing risk management,” said Mike Lawrence, Citi’s Global Chief Administrative Officer for Foreign Exchange and Local Markets said. “We are pleased to work with LCH and CLS to extend the benefits of this initiative to our clients and look forward to seeing widespread market adoption of this new service.”

Robin Wemyss, Global Head of FX Options Trading, J.P. Morgan, said “Clearing deliverable FX Options and their hedges is a significant step for the market. We look forward to seeing the number of counterparts and the associated liquidity grow in the coming months.”

LCH is clearing FX Options on eight currency pairs: AUDUSD, EURUSD, GBPUSD, USDJPY, USDCHF, EURJPY, EURCHF, EURGBP with physical delivery, as well as spot and forward hedges. ForexClear plans to add further FX products to its service in line with demand, and subject to regulatory approval.

Source: LCH

CLS, a market infrastructure group delivering settlement, processing and data solutions, today announced the launch of CLSClearedFX ─ the first payment-versus-payment (PvP) settlement service specifically designed for over the counter (OTC) cleared FX derivatives.

The service will enable central counterparties (CCPs) and their clearing members to safely and effectively mitigate settlement risk when settling cleared FX products.

LCH, a leading global clearing house, is the first to go live with the service offering for their clearing members, with further CCPs expected to join.

While the new service will operate independently of CLS’s leading PvP FX settlement service (CLSSettlement), participating CCPs will realize equally effective risk mitigation, cost-efficiency and liquidity benefits as those using CLSSettlement.

Alan Marquard, Chief Strategy and Development Officer at CLS, said: “Through the launch of CLSClearedFX, CLS is taking its proven track record in mitigating FX settlement risk to the cleared FX market. Bringing together the market infrastructures that mitigate counterparty and settlement risk, the two biggest risks in OTC cleared FX products, is a powerful step forward for the market.”

Paddy Boyle, Global Head of ForexClear at LCH, commented: “Offering physical settlement of cleared OTC FX products is a landmark moment for the market. We are delighted to be collaborating with CLS in pioneering in this area, delivering efficiencies and reducing risk for participants in the FX market.”

Source: CLS

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