Milestone for LCH.Clearnet’s compression service

LCH.Clearnet has eliminated over $100 trillion throughout 2015 through its compressions service.
The central counterparty’s (CCP) members have reduced a record amount in notional outstanding over the past year, compressing interest rate swaps (IRS), forward rate agreements (FRA) and overnight index swaps (OIS).

LCH.Clearnet is set to expand the service to inflation swaps and FX non-deliverable forwards (NDF) in 2016.

The transatlantic clearing house is also set to turn its attention towards buy-side clients over the next year.

“As the capital requirements under Basel III begin to bite, banks and clearing brokers are continually looking at ways to reduce exposures and drive down their clients’ and their own notional outstanding,” said Cameron Goh, head of clearing solutions, SwapClear and Listed Rates, LCH.Clearnet.

“At the same time, buy-side firms are keen to make operational savings by managing their books as efficiently as possible.”

LCH said its notional outstanding reached an all-time high of $426 trillion in November 2013, however increased compression activity over the last two years has driven down notional outstanding to its present levels of $254 trillion.

“Compression enables our members and their clients to do just that by offsetting compatible trades, allowing them to achieve significant capital and operational efficiencies,” added Goh. “We expect to see growing momentum for use of these services as we extend the offering to other products in 2016.”