LCH, a leading global clearing house majority owned by London Stock Exchange Group Plc (LON:LSE), has announced that it has extended its SwapClear service to offer clearing of Australian Dollar BBSW vs AONIA overnight basis swaps (AUD BOBs).
With SwapClear clearing approximately 85% of the the AUD interest rate derivatives market today, this addition will enable members and their clients to clear AUD BOBs alongside their existing SwapClear portfolio of interest rate derivatives. This allows participants to potentially achieve improved margin efficiencies by recognising offsets between AUD BOBs exposures and other interest rate derivative exposures in SwapClear.
SwapClear compression services and Settled-To-Market treatment of variation margin will also be available to eligible AUD BOBs cleared at SwapClear, facilitating capital efficiencies. CBA and Westpac were amongst the first SwapClear members to clear this new product at LCH. 64 members, and circa 140 client groups are actively clearing Australian Dollar interest rate derivatives through LCH, clearing on average AUD3.3 trillion per month in 2017.
Marcus Robinson, Head of Asia Pacific, LCH, said:
Regulatory initiatives such as the uncleared margin rules have acted as an incentive for firms to push more products into clearing. As a result cleared volumes have continued to rise across our broad spectrum of products in Australia and across the world. We see Australia and the wider Asia Pacific region as strategically important in interest rate derivatives, and in this spirit we are delighted to have extended SwapClear’s offering to clear AUD BOBs, in line with market demand.
AUD BOBs are the latest addition to SwapClear’s AUD interest rate derivative product coverage, which includes vanilla interest rates swaps (IRS), basis swaps, zero-coupon swaps, variable notional swaps, as well as overnight index swaps (OIS). Additional product extensions introduced at the same time include OIS tenor extensions on EONIA and SONIA, SONIA vs LIBOR Overnight Basis Swaps, and the introduction of new EONIA / Euribor Overnight Basis Swaps.