LCH.Clearnet receives Regulatory non-objection to launch OTC FX clearing
LCH, which was acquired by London Stock Exchange last week, received FSA’s approval to start clearing FX NDFs via its ForexClear service.
LCH.Clearnet Limited (LCH.Clearnet), the world’s leading independent multi-asset class clearing house, on Monday received regulatory non-objection for its new OTC foreign exchange (FX) clearing service (ForexClear) from the Financial Services Authority (FSA), and is working with members towards the imminent launch of non-deliverable forwards.
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About LCH. Clearnet
The LCH.Clearnet Group is the leading independent clearinghouse group, serving major international exchanges and platforms as well as a range of OTC markets. It clears a broad range of asset classes, including securities, exchange-traded derivatives, commodities, energy, freight, interest rate swaps, CDS and euro- and sterling-denominated bonds and repos, and works closely with market participants and exchanges to identify and develop clearing services for new asset classes.
A clearinghouse sits in the middle of a trade, assuming the counterparty risk involved when two parties (or members) trade. When a trade is registered with a clearinghouse, that clearinghouse becomes the legal counterparty to the trade, ensuring financial performance of the trading parties; if one of the parties fails, the clearinghouse steps in. By assuming the counterparty risk, the clearinghouse underpins many important financial markets, facilitating trading and increasing confidence within these markets.
Initial and variation margin (or collateral) is collected from clearing members; should they fail, this margin is used to fulfill their obligations. The amount of margin is decided by the clearinghouse’s highly experienced risk management teams, which assess a member’s positions and market risk on a daily basis. Both the soundness of the risk management approach and the resilience of its systems have been proven in recent times. LCH.Clearnet is regulated or overseen by the national securities regulator and/or central bank in each jurisdiction from which it operates.