LCH.Clearnet’s first CDS clearing service for European clients unveiled

19 July 2013

LCH.Clearnet SA, the Paris-based European central counterparty (CCP) subsidiary based in France, has received regulatory approval to clear credit default swaps (CDS) for European clients via CDSClear, LCH.Clearnet’s credit default swap clearing business.

According to the clearing house this is the first time European clients will be able to clear CDS indices and, subject to regulatory approval, LCH.Clearnet hopes to soon be able to offer single name CDS, introducing more efficiency into the marketplace.

CDSClear’s index clearing service aims to offer European clients improved portability through its asset tagging solution. Asset tagging allows clearing members to track which of their client-related non-cash collateral and existing positions could be transferred to another member in the event of a default. This is in-line with the imminent European Market Infrastructure (EMIR) regulations. The index clearing service also streamlines the legal documentation process between clients and clearing members.

CDSClear’s hoped for single name clearing service will potentially provide clients with extensive portfolio margining benefits. According to Charlie Longden, chief executive of CDSClear: “Global regulatory momentum is leading over-the-counter (OTC) market participants to clearing houses with robust and proven risk and default management. LCH.Clearnet clears the broadest set of European credit indices, and we are pleased to extend the benefits of our CDS clearing service to European clients.”

Commenting on the new launch, Barry Hadingham, head of derivatives and counterparty risk at end users Aviva Investors, said: “The market has been looking for a European CDS clearing solution for some time now, and we welcome LCH.Clearnet’s launch of CDS clearing for non-US clients. We are particularly pleased to see that the solution offers improved portability conditions and easy to navigate legal arrangements.”

Clearing members will continue to benefit from the ability to post non-cash collateral on a pledged account opened in the books of a Central Securities Depository (CSD) to cover their margin requirements.

• LCH.Clearnet has also announced this week that its group-wide chief executive, Ian Axe, is to leave the CCP. The new London Stock Exchange (LSE) ownership is certainly ringing the changes.

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