LCH to launch sponsored clearing at Paris CCP
01 March 2019 Paris
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LCH is building sponsored clearing at its Paris-based central counterparty (CCP), LCH SA, and is expected to launch later this year, according to Paul Elkins, head of product development, RepoClear and EquityClear, LCH.
Elkins explained that LCH is working hard to launch sponsored clearing at RepoClear SA and that there is a strong pipeline of institutions that would like to join.
Currently, RepoClear’s sponsored clearing service has been live at London-based clearing house, LCH Ltd, since September 2017.
Going back quite a few years, LCH decided to enable all of their members to clear all of their European debt in a single CCP.
LCH Group operates two central counterparties (CCPs), LCH Limited and LCH SA, in London and Paris respectively.
The London CCP clears the repos and debt that have been traditionally cleared and settled in an international central securities depository (ICSD) environment, Elkins explained.
The French CCP historically cleared euro debt that was settled in local CSDs environment in France, Italy and Spain.
Elkins said this meant members had their euro debt spread across the two CCPs, which meant that their members were unable to net their full portfolios.
He cited: “The four constraints for balance sheet netting are to have the same date and underlying currency, and also to have the same settlement location and counterparty.”
“By clearing Euro debt across two CCPs, members had two counterparties and they couldn’t aggregate and net their full portfolios. The marketplace was traditionally settling in two different settlement locations as well; one in an ICSD and one in the CSD environment.”
Elkins commented: “The benefits of a single CCP are quite clear to the market, and the market we interact with right now is the broker-dealer community. The market consolidated in only a matter of weeks having finalised developments to have all of the capability of a single CCP in January.”
“This shows how important balance sheet netting is for our members. We know that asset managers and buy-side institutions recognise the significant benefits that netting provides for bank-intermediaries and that by joining a larger, consolidated netting pool all benefit .”
Elkins explained that LCH is working hard to launch sponsored clearing at RepoClear SA and that there is a strong pipeline of institutions that would like to join.
Currently, RepoClear’s sponsored clearing service has been live at London-based clearing house, LCH Ltd, since September 2017.
Going back quite a few years, LCH decided to enable all of their members to clear all of their European debt in a single CCP.
LCH Group operates two central counterparties (CCPs), LCH Limited and LCH SA, in London and Paris respectively.
The London CCP clears the repos and debt that have been traditionally cleared and settled in an international central securities depository (ICSD) environment, Elkins explained.
The French CCP historically cleared euro debt that was settled in local CSDs environment in France, Italy and Spain.
Elkins said this meant members had their euro debt spread across the two CCPs, which meant that their members were unable to net their full portfolios.
He cited: “The four constraints for balance sheet netting are to have the same date and underlying currency, and also to have the same settlement location and counterparty.”
“By clearing Euro debt across two CCPs, members had two counterparties and they couldn’t aggregate and net their full portfolios. The marketplace was traditionally settling in two different settlement locations as well; one in an ICSD and one in the CSD environment.”
Elkins commented: “The benefits of a single CCP are quite clear to the market, and the market we interact with right now is the broker-dealer community. The market consolidated in only a matter of weeks having finalised developments to have all of the capability of a single CCP in January.”
“This shows how important balance sheet netting is for our members. We know that asset managers and buy-side institutions recognise the significant benefits that netting provides for bank-intermediaries and that by joining a larger, consolidated netting pool all benefit .”
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