Clearing house LCH has launched portfolio margining for interest rate products, enabling clients to offset exchange traded and over-the-counter derivatives for margin purposes.
Some two years after rival Eurex Clearing launched its version of the same service, LCH said that it had achieved the necessary regulatory approvals, meaning eligible members and clients can offset margin between OTC and listed interest rate derivatives.
Called LCH Spider, the new service analyses portfolios and automatically selects which eligible trades correlate. Initially, portfolio margining will be available for sterling and euro-denominated short term interest rate futures (STIRs) with plans to add further eligible contracts in due course.
LCH is staying true to its commitment to “open access” and will allow customers of any trading venue to clear and portfolio margin through the new service. LCH has worked with Nasdaq NLX to include its eligible futures contracts as part of LCH Spider’s go-live.
The clearing house will add CurveGlobal contracts following that new platform’s planned launch in the third quarter. LSE-owned CurveGlobal will offer trading in STIRs and long-term futures in Bund, Bobl, Schatz and gilts, going head to head with Eurex in those securities.
Deutsche Boerse and LSE, respective owners of Eurex Clearing and LCH, announced in February they were in talks to create the world’s biggest exchange by revenue. The planned US$30bn merger is currently being evaluated by regulators.
“LCH Spider has the potential to be a game changer for the rates market and we are delighted to deliver this service to our members and their clients,” said Daniel Maguire, LCH’s global head of rates and FX Derivatives. “This is another example of our innovation and commitment to partnering with the market to deliver greater choice and efficiencies, in line with LCH’s robust risk management and regulatory framework.”