Leading financial services clearing house, LCH.Clearnet, is planning to purchase International Derivatives Clearing Group to strengthen its position as a clearing provider. The move comes after LCH launched its FX clearing solution and have announced their US cross margining solutions.
The tie up with IDCG will give LCH a significant share of the US interest rate swap business, leveraging off their SwapClear service.
“LCH.Clearnet Group is committed to providing end-users with a broad range of clearing services for their over-the-counter trades. This strategic acquisition would complement our U.S. offering, where we are seeing accelerating client take-up for the SwapClear service,” said Michael Davie, Chief Executive of SwapClear.
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“This is an exciting, strategic opportunity which would extend the choice in our SwapClear client offering. It is further evidence of our commitment to the U.S. market and would provide us with additional opportunities to grow in the future,” said Ian Axe, Chief Executive of LCH.Clearnet Group.
LCH.Clearnet has entered the race of FX clearing with he launch of its ForexClear service.
The new service operates in a simple fashion:
- Trades are negotiated and traded bilaterally in accordance with current market practices.
- Each party independently submits their trade side to MarkitSERV for matching.Once matched, the trade is transmitted to LCH.Clearnet for clearing and novation through ForexClear.
- Notification of trade status updates are relayed from ForexClear to members via MarkitSERV.
- ForexClear calculates margin requirements throughout the 24-hour day and undertakes the risk netting and settlement of trades on maturity.
- Net daily financial settlement is made, throughout the life of the trade, using PPS. Distinct settlement at trade maturity is unnecessary due to the daily exchange of P&L via variation margin.
LCH.Clearnet was acquired by the London Stock Exchange in March 2012.