LCH Launches Portfolio Margining Service for Interest Rate Derivatives

LCH Spider offers members and their clients opportunities to benefit from risk and collateral efficiencies.

LCH, a global clearing house owned by the London Stock Exchange Group, has announced that it has launched LCH Spider, its portfolio margining tool for interest rate derivatives following confirmation of the required regulatory approvals.

LCH Spider enables margin offsets between listed and OTC interest rate derivatives portfolios.

From today, eligible members and clients using LCH’s SwapClear and Listed Rates services will be able to offset the margin between OTC and listed interest rate derivatives.

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The news follows last week’s announcement that the company’s SwapClear service had compressed over 8.4 million cleared trades, representing $1 quadrillion ($1,000,000,000,000,000) in notional since it started offering compression services in 2008.

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The next step in portfolio margining

Daniel Maguire, Global Head of Rates and FX Derivatives, LCH, commented: “LCH Spider has the potential to be a game changer for the rates market and we are delighted to deliver this service to our members and their clients. With the world’s largest interest rate derivatives liquidity pool at SwapClear and our open access approach, LCH Spider represents the next step in portfolio margining and is a compelling offering for those looking to manage their risk and collateral obligations more efficiently.”

LCH Spider is a fully automated service that analyses member and client portfolios and selects which eligible trades correlate and provide risk reduction. If a member opts in, the listed rates are then transferred to their OTC portfolio for offsetting and delivering risk and collateral efficiencies.

Portfolio margining will initially be available for sterling and euro-denominated short term interest rate futures (STIRs) with plans to add further eligible contracts, in line with customer demand and LCH’s risk management framework.

LCH Spider is available on an ‘open access’ basis, to any trading venue that is connected to LCH and which lists suitably correlated interest rate derivatives. The company has worked with Nasdaq NLX to include its eligible futures contracts as part of LCH Spider’s go-live.

The company is also set to introduce CurveGlobal contracts following the platform’s planned launch in Q3 2016. The implementation of MiFID II will further drive the possibility of greater risk offsets. Members and clients looking to calculate the potential benefits of using LCH Spider on their portfolios can simulate this using SMART Spider, a new extension of LCH’s margin simulation tool.


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