NEW YORK and LONDON, March 14,
2012 /PRNewswire/ -- LCH.Clearnet Limited
(LCH.Clearnet), New York Portfolio Clearing LLC (NYPC), The
Depository Trust & Clearing Corporation (DTCC) and NYSE
Euronext (NYX) today jointly announced that they have agreed to
explore expanding the existing combined "one-pot" cross-margining
arrangement to include interest rate swaps cleared by
LCH.Clearnet.
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The parties' goal, defined in a Memorandum of Understanding
(MOU), is to deliver greater capital efficiency to market
participants by combining NYSE Liffe U.S.-traded interest rate
futures contracts already cleared by NYPC, fixed income cash and
repo trades cleared by the DTCC's Fixed Income Clearing Corporation
(FICC) and interest rate swaps cleared by LCH.Clearnet's SwapClear
service into a single portfolio for purposes of margin netting and
offsetting. Netting and recognizing offsetting risk within a
multi-product single asset class portfolio would be designed to
optimize margin requirements on the combined portfolio.
The existing NYPC and FICC "one-pot" arrangement currently
offsets margin requirements for both fixed-income cash and repo
trades and futures contracts. NYPC also has an open
architecture that allows for connectivity to LCH.Clearnet's
SwapClear platform. The agreement would extend those benefits
to one of the fastest growing asset classes, thereby improving
efficiency to market participants. The collaborative
arrangements, once in place, would also improve transparency and
risk mitigation by creating the opportunity for regulators to
obtain a single, combined view of portfolio risk for participants
across a wider range of asset classes.
As agreed in the MOU, the parties will assess areas where
operational and collateral management efficiencies can be achieved
through mutually agreed service level arrangements between the
organizations in the United States. All parties have also
committed to developing an aligned default management process to
protect market participants, as well as the development of payment
and settlement mechanisms for non-U.S. dollar products. As
was the case with the initial "one-pot" margining plan that was
first brought to market in March
2011, the final margining structure and agreements would be
subject to the review and approval of both the U.S. Commodity
Futures Trading Commission and the U.S. Securities and Exchange
Commission. Approvals will also be sought from other
regulatory bodies. Additionally, all parties have agreed to
develop a joint governance arrangement regarding the combined risk
management system and will work together to secure the appropriate
regulatory approvals, both in the U.S. and abroad.
"This collaboration presents a tremendous opportunity to provide
market participants with a "best-in-class" clearing solution that
brings together each of the firms' expertise and resources across
an unrivalled and broad spectrum of interest rate products," said
Daniel Maguire, Head of SwapClear
U.S. "Our working groups – with members from all parties –
have done tremendous work over recent months reviewing the
potential for this offering and we are excited to continue working
together."
"All of our customer firms face new capital requirements from
new regulations," said Michael
Bodson, Chief Operating Officer, DTCC. "Being able to
offset some of that through innovative margining schemes such as
what is currently being offered by FICC and NYPC and enhanced
through this alliance with SwapClear can be of great benefit to all
our clients…and help regulatory authorities as well."
"NYPC is already delivering significant savings to our members
daily through our current margining process," said Murray Pozmanter, Interim CEO of NYPC and
Managing Director, Clearing Services, DTCC. "Those
efficiencies will greatly increase once interest rate swaps from
SwapClear are added to the mix."
"By adding interest rate swaps to the same methodology utilized
by market participants for the margining of their cash and futures
trades, we believe this collaboration provides the market with a
creative solution that addresses many of the industry's needs
around scarcity of capital and delivers a powerful new value
proposition for interest rate futures traded on NYSE Liffe U.S.,"
said Thomas Callahan, CEO of NYSE
Liffe U.S.
About SwapClear
Established more than 12 years ago, SwapClear is the only
truly global clearing service for interest rate swaps. To
date, it has cleared more than 1.5 million OTC interest rate
swap trades in 17 of the world's largest currencies. Since
1999, SwapClear has cleared a total notional value of more than
$290 trillion, and its membership
currently stands at 62. SwapClear is also the only OTC
clearing service to successfully handle a significant OTC interest
rate swap default, doing so when it resolved Lehman Brothers'
$9 trillion IRS default in 2008,
resulting in no loss to any market
participants. www.swapclear.com
About LCH.Clearnet
The LCH.Clearnet Group is the leading independent clearing
house 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. LCH.Clearnet has offices in
London, New York, Paris and Amsterdam and is regulated or overseen by the
national securities regulator and/or central bank in each
jurisdiction from which it operates. In the U.S., LCH.Clearnet
Limited has been regulated by the CFTC as a DCO since 2001.
About NYPC
New York Portfolio Clearing, LLC (NYPC) is registered as a
U.S. Derivatives Clearing Organization with the Commodity Futures
Trading Commission. A joint venture of NYSE Euronext and the
Depository Trust & Clearing Corporation, NYPC clears interest
rate products and supports the cross-margining of fixed income cash
products from DTCC's Fixed Income Clearing Corporation with their
related, offsetting derivatives trades in a "single pot". For more
information, please visit: www.nypclear.com.
About DTCC
DTCC, through its subsidiaries, provides clearance,
settlement and information services for equities, corporate and
municipal bonds, government and mortgage-backed securities, money
market instruments and over-the-counter derivatives. In addition,
DTCC is a leading processor of mutual funds and insurance
transactions, linking funds and carriers with their distribution
networks. DTCC's depository provides custody and asset servicing
for more than 3.6 million securities issues from the United States and 121 other countries and
territories, valued at US$36.5
trillion. In 2010, DTCC settled nearly US$1.66 quadrillion in securities transactions.
DTCC has operating facilities and data centers in multiple
locations in the United States and
overseas. For more information, please visit www.dtcc.com.
About NYSE Liffe U.S.
A unit of NYSE Euronext, NYSE Liffe U.S. is a partnership
with eight leading market participants, Citadel Securities, DRW
Ventures LLC (an affiliate of DRW Trading Group), GETCO, Goldman
Sachs, Morgan Stanley and UBS. It is a global, multi-asset
class futures exchange trading a diverse range of products,
including the successful Eurodollar and U.S. Treasury interest rate
products, a suite of MSCI-based futures and liquid precious metals
contracts. In the second quarter of 2012, the exchange plans
to launch exclusive new futures contracts based on the DTCC GCF
Repo Index™. NYSE Liffe U.S. utilizes the proven LIFFE
CONNECT® trading platform designed and maintained by NYSE
Technologies that matched nearly 4.5 million contracts per day on
the NYSE Liffe markets in Europe
in 2011. The exchange offers a wide range of global
connectivity options allowing members to efficiently transact on
the platform in a highly cost efficient manner. For more
information, please visit www.nyseliffeus.com.
SOURCE NYPC