Payment Supplement Backloading Compounding on Fixed Legs (Annual) Nominal Constant Nominal Nominal Fixed Rate Non-Standard Interpolation Method Fixing Index Index Index Lags SwapClear is a global clearing service for OTC interest rate swaps and currently clears more than 50% of the global nominal market. Established in 1999, SwapClear first settled simple vanilla interest rate swaps in four major currencies. Today, it makes swaps in 17 currencies; USD, EUR and GBP up to 50 years, AUD, CAD, CHF, SEK and Vanilla JPY up to 30 years and the remaining nine currencies up to ten years. It also removes 2-year OIS in USD, EUR, GBP and CHF. To date, more than two million trades in SwapClear have a nominal amount of more than $316 trillion. According to a proposal approved last Tuesday by the CFTC, swaps on interest rate and credit risk could be guaranteed by clearing houses from the fall. Since the bankruptcy of Lehman Brothers, market failures have come under as much scrutiny by financial institutions as they are by supervisors, and financial markets are therefore currently going through a period of unprecedented regulatory reform. One of the key areas of the proposed legislation is mandatory central clearing for certain OTC derivatives, including currencies. After extensive research and analysis of the FX derivatives market and its intrinsic risks, LCH has launched a new bespoke clearing solution for FX Forward (NDF), ForexClear. ForexClear covers the most active currencies on the NDF marketplace. Subsequent development phases will include a wider range of currencies and maturities, as well as additional OTC exchange products such as NDOs, FXOs, NDFs, forwards and swaps. In September 2008, LCH successfully managed Lehman Brothers` $9 trillion interest rate loss, which included more than 66,000 transactions by implementing SwapClear`s default management process.
The default has been fully corrected within the margin held and without loss to other market participants. Garlic. Clearnets SwapClear, the interest rate swap clearing service, now breaks down more than 40% of all outstanding advance interest rate (FR) agreements, derivatives used to hedge future interest rate fluctuations. FRA are contracts in which two parties agree on the interest rate to be paid or received at a given time and are an important instrument to offset short-term interest rate swap risk. Since the introduction of the product in the swapClear offer, LCH has processed more than $35 trillion, for more than 100,000 fra exchanges in 10 currencies. “Cleared FRAs provides the industry with liquid, highly correlated product clearing for offset short-end interest rate risk,” said Michael Davie, Chief Executive Officer of SwapClear. . . .