LCH.Clearnet launches spider to cut rates risk
LCH.Clearnet is gearing up to launch Spider, a new portfolio margining tool that will reduce margin requirements for interest rate derivatives by looking for offsets between listed and over-the-counter positions.
The U.K. clearinghouse, which is seeking regulatory approval to launch Spider early in 2016, said the tool can analyze a clearing member’s portfolio and automatically identify combinations of listed and OTC positions that have offsetting risk exposures. The listed positions are then transferred to the OTC portfolio for offsetting.
LCH.Clearnet’s SwapClear is currently the leading clearing service for OTC interest rate swaps, but lacks a presence in the interest rate futures market. To address that issue, it is working with Nasdaq NLX to include its eligible futures contracts. It also expects to include CurveGlobal, the futures exchange that London Stock Exchange Group expects to launch in the first half of 2016.
To use Spider, clients need to be clearing-eligible at LCH.Clearnet for both OTC and listed rate trades. Clients also need to ensure that they are using the same clearing member for both products. Behind the scenes, the clearinghouse has created a single default fund with two margin classes. Inclusion in margin class is based on where cleared positions are being margined, with a default waterfall structure in place to reduce exposures between margin classes.
