JPMorgan is adding foreign exchange to its over-the-counter (OTC) clearing offering. The company is continuing its efforts towards clearing as the upcoming MiFID II regulations are expected to drastically change trading in the area. The bank cleared its first non-deliverable forwards (NDF) trades via LCH Forexclear on behalf of non-member clients earlier this month.
With the introduction of the next generation of the EU-wide regulatory framework, changes to OTC clearing include a requirement for straight-through-processing (STP). JPMorgan also highlights as a factor the cleared volumes growth due to the new variation margin rules introduced on the 1st of March earlier this year.
Under the European Markets Infrastructure Rules (EMIR), parties have to collateralize their marked-to-market exposure in OTC derivatives. The variation margin requirements have been applied to all uncleared OTC transactions. The move included FX forwards, FX swaps and cross-currency swaps, among others, which sparked client interest in cleared products.
The Global Head of ForexClear at LCH, Paddy Boyle, commented on the growing business: “LCH continues to see record volumes growth at ForexClear, as the introduction of the uncleared margin rules continue to drive material demand for clearing across dealers and end users.”
JPMorgan is aiming to update its offering before the launch of MiFID II, launching OTC FX products clearing in order to provide clients with full transparency across the execution chain.
Commenting on the news, the Managing Director and Head of Global Clearing at JPMorgan, Nick Rustad, said: “This launch is focused on automation of flow which is key to our non-member clients. It enables us to provide clients greater transparency of the clearing status of their trades from execution to settlement.”
“This was a joint effort across Execution and Clearing businesses, as part of JPMorgan’s commitment to support non-member clients in the cleared FX space,” Mr Rustad explained.