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July 1, 2016

End of a Clearing Project, SwapClear LLC

Wind down of SwapClear LLC in the US

In June 2013 LCH.Clearnet launched a US entity to compete with on-shore US clearing houses, SwapClear LLC. 3 years later, the open notional has now reduced to zero, due to a decision made between LCH.Clearnet and it's members to consolidate their clearing activity in the global SwapClear Ltd entity. The germination of LLC was the purchase of IDCG, a failed US CCP but with a prized CFTC DCO license to operate a CCP in the US. LCH wished to counter the perception that SwapClear Ltd was an off-shore service, to capture the massive US buy-side flow of OTC business.

We now know that CME has won significant business in the US, so the move to transfer the LLC business into the global SwapClear entity is a pragmatic response, and will bring netting benefits to SwapClear members. The majority of USD trade clearing is still within SwapClear Ltd, with minority amounts at other CCPs. The purchase of IDCG with the build and operation of the LLC service will have been expensive, and may not have broken even, making this a costly commercial play. It seems that for now the OTC clearing landscape has stabilised, until such time as the effects of Brexit are known. 

As at 24th June:

OTC CCP Open Notional
CME US $17.1trn
SwapClear Ltd $142trn
JSCC $11.5trn

 

The closure notification to the CFTC is attached below. Credit for the stats goes to ClarusFT and their CCPView service, and confirmation of this story and the PDF from the press office at LCH/LSEG.

Bill.


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