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Risk Management

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LCH.Clearnet to Launch OTC FX Clearing

In coming weeks, LCH.Clearnet's new service ForexClear will provide clearing for FX non-deliverable forwards in coming weeks, with support from 14 major market participants.

LCH.Clearnet Limited began clearing foreign exchange (FX) today. Fourteen major market participants actively involved in its establishment are supported the service. A number of additional participants are scheduled to begin clearing in the coming weeks.

The new service, ForexClear provides clearing for FX non-deliverable forwards (NDFs) and was designed in close collaboration with LCH.Clearnet’s members. The service has launched with clearing between direct clearing members, while actively consulting with clients to deliver a full clearing service to other current and prospective clearing members, and their global clients in due course.

NDFs are cash settled products, actively traded in a range of high growth economy currencies. From launch the service will clear NDFs in the following currencies - Brazilian Real, Chilean Peso, Chinese Yuan, Indian Rupee, Korean Won and Russian Ruble all against the U.S. dollar. Further currencies are being added to the service with the aim to provide 95 percent market coverage.

“In response to market demand and pending regulatory changes, we are delighted to be bringing LCH.Clearnet’s leading risk mitigating solutions to NDFs and we will be looking to broaden the service in line with client demand,” commented Gavin Wells, managing director, ForexClear, in the release.

ForexClear will build upon LCH.Clearnet’s 12 years of global OTC clearing experience. SwapClear, its interest rate swap (IRS) service, has a proven track record of successfully mitigating risk for its users with over $280 trillion OTC IRS notional outstanding in 17 currencies. In 2008 LCH.Clearnet resolved Lehman Brothers’ $9 trillion OTC IRS default and is now able to extend its unique and robust risk management methodology to the FX market through ForexClear, the clearinghouse pointed out in the release.

In a prepared statement, Ian Axe, CEO, LCH.Clearnet Group Limited, said; “Our FX service highlights the strength and breadth of our unique OTC expertise and our commitment to providing market leading risk management solutions across a wide range of asset classes. We shall continue to evolve our offering in line with client demand to ensure it offers the most effective risk management, as well as capital and operational efficiencies, to the FX marketplace.”

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio

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