LCH ForexClear Implements New FX Options Clearing Service

LCH's FX options clearing service will aim to reduce settlement and counterparty risk

LCH has implemented a new service geared towards augmenting clearing across a wider range of products and participants in the foreign exchange market. This effort has culminated in the launch of deliverable FX options clearing, which has already drawn support from leading banks to adopt the service.

The new offering incorporates the first physical FX settlement service for cleared FX products. Developed in partnership with CLS, the comprehensive effort is looking to improve the broader industry. As such, the new FX options clearing service will aim to reduce settlement and counterparty risk while improving efficiencies for those operating in the OTC cleared FX market.

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FX, LCH, clearing, service
Paddy Boyle, Global Head of ForexClear, LCH

Paddy Boyle, Global Head of ForexClear, LCH, commented on the launch: “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.”

As a leading global clearinghouse, LCH’s new service has also attracted multiple banks, including Barclays, Citi, and JPMorgan, with others expected to start clearing the product in H2 2018. At present, clearing FX Options extends LCH’s ForexClear service, which is a major market clearer of FX NDFs, estimated at approximately $70 billion in average daily volume.

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This stance was reiterated by Alan Marquard, Chief Strategy and Development Officer, CLS, who commented: “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.”

“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,” explained Andrew Batchelor, MD, Global FX Business Manager, Barclays.

LCH’s service supports physical delivery, as well as spot and forward hedges. ForexClear is also laying out plans to add further FX products to its service in line with demand, and subject to regulatory approval. LCH is presently clearing FX Options across eight currency pairs. This includes the following:

  • AUDUSD
  • EURUSD
  • GBPUSD
  • USDJPY
  • USDCHF
  • EURJPY
  • EURCHF
  • EURGBP

“The launch of FX Options clearing capabilities unlocks significant new opportunities for market participants by enabling operational efficiency while optimizing risk management. 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,” added Mike Lawrence, Citi’s Global Chief Administrative Officer for Foreign Exchange and Local Markets.

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