Capitolis Connects to ForexClear’s Smart Clearing

Capitolis is connecting to LCH ForexClear’s Smart Clearing solution, adding, the firm says, another layer of optimisation benefits to help market participants overcome the challenge of increased costs resulting from the introduction of the Standardised Approach to Counterparty Credit Risk (SA-CCR).

The collaboration helps find the optimum capital and funding state between cleared and uncleared markets by moving optimised trades where they best fit. In a proof-of-concept with nine banks, Capitolis demonstrated the benefits in capital and funding that FX Smart Clearing would provide to the company’s existing SA-CCR optimisation service by reaching a network yield of 42% of total funding costs including the funding of capital.

“Combining FX Smart Clearing with our post-trade optimisation technology is the ideal approach to managing capital for our customers,” says Gil Mandelzis, CEO and founder, Capitolis. “The relationship with LCH ForexClear, coupled with our network of participating global banks, is a sophisticated and advanced model for the industry, bringing multi-lateral optimization to the next level by including a clearing node.”

James Pearson, Head of LCH ForexClear, adds, “Through this initiative, more market participants can benefit from FX Smart Clearing, enabling capital and funding requirement benefits under SA-CCR. FX Smart Clearing is another tool we are providing for banks to financially optimise their resources, unlock capital constraints and help to ensure a safe and efficient financial system.”

Following the proof-of-concept, Capitolis says it will roll out the service in conjunction with LCH ForexClear to reduce capital burdens and balance margin requirements for global banks. It adds, with the functionality, it hopes to add additional banks into future FX Smart Clearing exercises, increasing the benefit for all.