Anish Puaar
12 Jun 2014
LCH.Clearnet has become the first UK-based clearing house to receive approval under incoming European derivatives rules, as the region continues to prepare for the introduction of mandatory swap clearing.
LCH.Clearnet Limited, the UK arm of the clearing house which is majority-owned by the London Stock Exchange, is the biggest clearer of interest rate swaps globally and becomes the seventh clearing house to receive approval under Emir.
So far this year, Swapclear, LCH.Clearnet’s interest rate swap clearing unit, has cleared trades worth over $305 trillion, according to its own figures.
Michael Davie, chief executive of LCH.Clearnet Limited, said: “We have worked diligently with our regulators, our members and their clients to develop best-in-class solutions to meet the requirements and we remain fully committed to supporting the market as the European clearing mandates evolve.”
The approval means that all of the LSE Group’s clearing houses have received Emir authorisation. LCH.Clearnet SA, the firm’s French clearing arm, and Italian clearing house Cassa di Compensazione e Garanzia obtained their authorisations in late May.
Nasdaq OMX, Eurex Clearing and Poland’s KDPW_CCP are the other clearing houses that have received Emir approval.
Emir is Europe’s overhaul of the derivatives markets. It requires derivatives trades to be reported to newly created trade repositories and for standardised swaps to be processed through clearing houses in order to mitigate systemic and counterparty risk.
Under the approval process, clearing houses are first required to file an application with their national regulator. Once the application is deemed complete, a so-called “college of regulators” conducts a detailed assessment of the application. The national regulators in each college are based on the other European countries where the clearing house is most active.
The first clearing house approval – Nasdaq OMX – on March 18 started the clock ticking on when swaps need to cleared in Europe. The European Securities and Markets Authority is expected to start consulting the industry in the coming weeks on the types of derivatives that should be cleared under the new rules. Mandatory clearing is expected to begin in early 2015.
