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Wells Fargo Joins LCH.Clearnet's SwapClear

The global interest rate derivatives clearinghouse is in the headlines for attracting a joint bid from NYSE Euronext and Markit.

Wells Fargo Bank NA said it signed a letter of intent to join LCH.Clearnet Ltd.’s SwapClear, the global clearing service for over-the-counter (OTC) interest rate swaps.

Adrian Kayari, Wells Fargo’s head of Interest Rate Derivative Trading, comments in the release: “Interest rate swaps are an integral part of our business and clearing will enable us to mitigate counterparty risk and benefit from operational efficiencies. We look forward to leveraging the many facets of SwapClear’s services."

SwapClear currently has 53 clearing members. Wells Fargo will bring the total number of SwapClear clearing members to 54. More banks are joining LCH.Clearnet to comply with the Dodd-Frank Wall Street Reform Act requiring eligible swaps to be guaranteed by clearing houses.

However, LCH.Clearnet is also the subject of a bidding war between various exchanges. In the last few weeks Markit, the private data company owned by banks and other players has partnered with NYSE Euronext to bid for the London-based clearing house. LCH.Clearnet also received bids from Nasdaq OMX and the London Stock Exchange, according to media reports, though a Financial Times article indicated that the LSE is not interested. Also, SwapClear has recently expanded into the U.S. to compete with CME Group.

Established as global clearing service for IRS, SwapClear has cleared over 1.5 million OTC IRS trades, the largest part of the lucrative OTC derivatives marketplace. The 950,000 trades in SwapClear have an aggregate notional principal amount of over $295 trillion, with a further $41.5 trillion of cleared transactions removed through multilateral trade compression.

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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