“We are thrilled to be joining LCH CDSClear’s FCM member base for US participants,” said Jason Swankoski, global head of strategy and product, derivatives clearing, at Morgan Stanley & Co in a statement on Wednesday.

“We look forward to this collaboration as we continue to invest in our services and expand our product offering.”

LCH said the move will enable Morgan Stanley’s clients to benefit from margin offsets and operational efficiencies by accessing a broader range of cleared CDS products.

“We are delighted to welcome Morgan Stanley to LCH CDSClear as a new FCM,” said Marcus Robinson, head of LCH CDSClear, part of LSEG Post-Trade, in a statement.

“This will provide the bank and its clients with new opportunities to achieve significant capital, margin and operational efficiencies. As we extend LCH CDSClear’s clearing capabilities to even more market participants, we are committed to creating a truly global service with a single pool of liquidity for the cleared CDS market with client access either via FCMs or the EMIR clearing model. This is just the next step on an exciting journey, as we expand our support worldwide.”

BNP Paribas Securities Corporation became the first US futures commission merchant to join the LCH CDSClear service in February as part of the clearing house’s expansion into US credit derivatives.

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The expansion is designed to offer participants greater choice on where to clear their CDS portfolios. BNP Paribas Securities Corporation has cleared the first US buy-side trade using the service.

“We are proud to be the first FCM member to go live with client clearing at LCH CDSClear for US market participants and are thankful to LCH for this opportunity,” said Gaspard Bonin, deputy global head of derivatives execution and clearing, BNP Paribas. “We continue to invest in our services and demonstrate our commitment to our American clients as their European bank of choice.”

LCH said the extension builds on its plans to grow into a global service. The clearinghouse went live clearing for several Asian and emerging markets indices – in single and sovereign single names – in December 2022. It had gone live clearing iTraxx Australia indices in the few months prior.

“Onboarding FCM members and expanding our services to US clients means we are not only extending the benefits of clearing to more market participants, but we are also increasing the choices that they have in CDS clearing,” said Frank Soussan, global head of CDSClear and head of SA EquityClear and CommodityClear, LCH.

“This is a significant step in our commitment to providing a truly global service with a single pool of liquidity to the cleared CDS market and we look forward to continuing to support our clients globally.”

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LCH – part of the post-trade division of London Stock Exchange Group – has announced that Goldman Sachs International and Goldman Sachs Bank Europe SE have gone live as clearing brokers at CDSClear at it continues to expand its network.

“By partnering with us, Goldman Sachs is expanding the credit clearing opportunities available to its clients, enabling them to reduce credit portfolio risk and capital, and benefit from margin offsets and operational efficiencies,” said LCH in a statement. 

Europe-based CDSClear allows users to cross-margin European and US products. In 2012 it became an international service following regulatory efforts to enforce the central clearing of certain credit default swaps.

Two years later, the European Securities and Markets Authority reauthorised the CCP to clear the products under the European Market Infrastructure Regulation. 

Richard Pape, managing director, Goldman Sachs International, highlighted that the move will allow its clients to access an increased variety of credit derivatives eligible for clearing.

“We are excited to expand our Derivatives Clearing platform with the addition of LCH Clear,” he said. “As a clearing broker at LCH CDSClear, we can provide our clients with access to the broadest range of credit derivatives eligible for clearing, enabling them to reduce their credit portfolio risk and lower costs through capital reduction, margin offsets and greater operational efficiency.”

LCH has previously stated its intention to continue the expansion process for its clearing network and the range of credit products eligible for clearing.

Frank Soussan, global head of LCH CDSClear, said: “I’m delighted to welcome Goldman Sachs International and Goldman Sachs Bank Europe SE as new clearing brokers at LCH CDSClear. Our collaboration will equip Goldman Sachs’s clients with the tools they require to reduce their risk factors and gain capital potential through clearing.”

Last month, Barclays and Barclays Ireland went live as clearing brokers at CDSClear in a bid to benefit from capital gain opportunities.

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LCH said it was the first to offer clearing of credit index options back in 2017, with the recent expansion now including the credit default swap index (CDX) investment-grade 5Y and CDX high yield 5Y indices.

The expansion covers one month, two month, and three-month expiries on the CDX.IG 5YR OTR and OTR-1 series and CDX.HY 5YR OTR and OTR-1 series.

“JP Morgan has a long-standing commitment to US credit index options trading and clearing offers substantial benefits to the asset class including additional netting opportunities to risk manage portfolios,” Aymeric Paillat, global head of credit index and options trading at JP Morgan commented on the launch. “Today’s announcement also opens the door to more trading participants in the product.”

The news follows a series of new client clearing members for credit default swaps at LCH throughout this year, such as Bank of America and Morgan Stanley.

Morgan Stanley went live with LCH for client clearing via CDSClear in July. More recently in October, Bank of America cleared its first trade with Aegon after going live with client clearing at LCH CDSClear.

“LCH was the first CCP to clear credit index options in 2017, and we have successfully built significant liquidity in the product, with over €64 bn iTraxx options cleared in 2020 to date,” said Frank Soussan, global head of CDSClear and EquityClear at LCH.

“We are pleased to have strong support from the dealers for clearing options and the addition of these CDX high yield and CDX investment-grade indices is a significant enhancement to our offering, complementing the broad set of cleared products we already offer.”

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LCH confirmed in a statement that Bank of America will now provide client clearing though its European entities on CDSClear, as the clearing house continues to target expansion of its CDSClear membership and client clearing business.

“We’re pleased to have gone live as a clearing broker of LCH CDSClear, providing our clients access to clearing of a wide range of credit derivatives products,” said global head of OTC clearing at Bank of America, Felicia Grumet.

“The associated cross margining opportunity of clearing a wide range of products at CDSClear offers clients capital opportunities “In addition to operational efficiencies offered by clearing, clients benefit from strong risk management protection.”

LCH has been working with buy-side firms through the service since March 2017 when Amundi went live on CDSClear. In August, LCH said that BlueCrest Capital Management had cleared its first European index trade on LCH’s CDSClear.

“I’m delighted to welcome Bank of America as our latest clearing broker, providing CDSClear’s services to its clients,” said global head of CDSClear at LCH, Frank Soussan. “This follows the recent launch of clearing of the iTraxx ESG index and enhancements to our margin framework. The go-live underlines CDSClear’s continued growth and support for member and client clearing.”

Last month, LCH went live with clearing the new environmental, social and governance (ESG) iTraxx index series, which went live for trading in June this year. LCH said at the time CDSClear was the first clearing house to offer clearing of the product. 

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The clearing house has been working with buy-side firms through the service since March 2017 when Amundi went live on CDSClear.

“Connecting to CDSClear gives us access to clearing a wide range of credit derivatives. Combined with its enhanced margin framework, this enables significant potential efficiencies across our trading strategies,” said credit portfolio manager at BlueCrest, Simon Gee.

This latest announcement underlines the expansion of LCH CDSClear’s membership and client clearing franchise, the London Stock Exchange said in a statement.

“I’m delighted that BlueCrest has gone live at LCH CDSClear, successfully clearing a European index trade. This follows the recent enhancement to our margin framework and underlines CDSClear’s continued growth and support for buy-side customers. We look forward to continuing to work with and support their trading activity,” said global head of CDSClear at LCH, Frank Soussan.

In July, Morgan Stanley confirmed it had gone live with LCH’s CDSClear to launch the client clearing of credit default swaps.

Deutsche Bank also became the first German bank to go live with CDSClear in April, followed shortly by Banca IMI which was the first Italian clearing member to join the CDSClear service.

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LCH said that Goldman Sachs was among the first market participants to clear the products, which are credit default swaps referencing subordinated debt of major European banks and insurance companies from the Markit iTraxx index.

“Clearing the full range of subordinated financials, alongside senior financials single names allows us to benefit from significant margin offsets through LCH’s portfolio margining, in addition to the inherent operational and counterparty risk management advantages of clearing,” said Jasdeep Singh Aneja, managing director at Goldman Sachs.

Head of multi-asset trading at Union Investment, Christoph Hock, added that CDSClear is a key partner for the asset manager’s credit business, allowing the business to extend clearing benefits to a larger portion of its credit portfolio. He also said Union Investment is keen on clearing products on a voluntary basis.

LCH CDSClear cleared a record €695.1 billion in notional during the first half of last year across European and US index and single name credit default swaps and index options, up 21% from the same period in 2018. The clearinghouse also saw a record month of activity in June, with €138 billion cleared across European and US products. More than 130 new clients also went live with CDSClear during the first half of 2019, with 149 clients in total live on the service as of June.   

“This is first time that both subordinated financials indices and all their single name constituents are available for clearing,” Frank Soussan, global head of CDSClear, commented. “The launch comes following rigorous risk reviews and testing, both internally and with the market. We are pleased to offer another innovative product which gives our members and their clients the opportunity to make their trading activity more efficient.”

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The move means that Morgan Stanley and its clients gain access the LCH CDSClear’s credit derivatives referencing single names and indices, and can act as a clearing broker for clearing credit default swaps for its client base.

“As an increasing number of our clients either become mandated or look to clear credit derivatives, it’s important that we are able to offer them the broadest range of products,” said Mark Bortnik, European head of derivatives clearing at Morgan Stanley. “Adding LCH CDSClear to our client clearing platform ensures we continue to offer our clients a differentiated and best in class solution.”

Morgan Stanley joins several other investment banks in launching client clearing through LCH CDSClear, including Deutsche Bank which became the first German bank to do so in April, and Banca IMI which was the first Italian clearing member to join the CDSClear service around the same time.

“I’m delighted that Morgan Stanley has extended its membership and that their clients will now be able to access our services,” Frank Soussan, global head of CDSClear, added. “2019 has been an exceptional year for us so far in terms of growing client participation and volumes, and we look forward to continuing this growth trajectory over the coming months.”

LCH CDSClear cleared a record €695.1 billion in notional during the first half of this year across European and US index and single name credit default swaps and index options, up 21% from the same period last year.

The clearinghouse also saw a record month of activity in June, with €138 billion cleared across European and US products. More than 130 new clients also went live with CDSClear during the first half of the year, with 149 clients in total live on the service as of 30 June.  

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The move means that the investment bank of Intesa Sanpaolo Group now has access to clearing of credit derivatives referencing single names and indices, and will also act as a clearing broker for clearing credit default swaps for its client base.

“Joining CDSClear means that Banca IMI and our clients can benefit from LCH’s robust risk management across a wide range of credit derivatives,” said Massimo Mocio, general manager of Banca IMI. “Clearing enables us to mitigate counterparty risk as well as benefit from the capital and operational efficiencies associated with clearing.”

Banca IMI is already a clearing member for LCH EquityClear and RepoClear, but the extension of its membership to CDSClear means it will achieve greater margin efficiencies through the portfolio margining of offsetting positions cleared at LCH, the clearinghouse said in a statement.

“I’m delighted to welcome Banca IMI as CDSClear’s first Italian clearing member, marking an important stage in our growth,” Frank Soussan, global head of CDSClear, added. “During 2018, we significantly grew our client clearing business in Europe, as well as processing record volumes of cleared notional, and we look forward to continuing to extend our clearing membership and activity during the course of 2019.”

Earlier this month, LCH implemented three workflow automation solutions from software provider genesis across its FX, swaps and credit default swaps clearing lines to support its growth plans. LCH worked alongside genesis to build a suite of complementary services, including member and client web portals for SwapClear, and a CDS option electronic exercise platform for CDSClear.

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Asset management firms MEAG and Union Investment are the first buy-side clients to connect to CDSClear via Deutsche Bank, clearing European and US credit default swaps at LCH, according to the UK clearinghouse.

“We’re delighted that Deutsche Bank is the latest clearing broker to join our growing network of firms offering their clients the ability to clear credit derivatives at LCH. The German market is a major hub for credit derivatives, and we are pleased to welcome additional clients from Germany as our customer base continues to expand,” said Frank Soussan, global head of CDSClear at LCH.

Jan Reher, senior portfolio manager for fixed income at MEAG, added that central clearing allows MEAG to better manage risk for its credit derivatives trading and connecting to LCH provides access to a broad range of cleared US and European credit default swaps products.

Christoph Hock, head of multi-asset trading at Union Investment, stated that transparency is an important element of risk management, and LCH CDSClear allows Union Investment to trade and clear credit derivatives in a standardised manner.

“Within the European CCP landscape LCH has a wide range of credit derivatives available. On these grounds we are happy to have set-up the business relationship to LCH CDSClear to enhance delivering highest quality standards of best execution to our clients,” Hock concluded.

Earlier this month, LCH announced it has implemented three workflow automation tools from trading software provider genesis across its foreign exchange, swaps and credit defaults swaps segments. genesis worked with LCH to build a suite of complementary solutions including a credit default swaps option electronic exercise platform for CDSClear to help to support business growth.

“We are committed to the derivatives clearing business and continuously review our offering to evolve and grow in line with the demands of our clients. Offering clients access to LCH CDSClear will provide them with more choice, and we are delighted to have completed this milestone,” Nic Maalouf, global head of listed derivatives and clearing at Deutsche Bank, also commented.

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