ForexClear to Clear CNH FX Products

LSEG’s LCH clearing business says it has signed a Memorandum of Understanding (MoU) with Hong Kong’s CMU OmniClear, to allow it to clear CNH FX products through ForexClear in response to what it says is market demand.

CME OmniClear is a wholly-owned subsidiary of the Exchange Fund, managing the operations and business development activities of the Central Money Markets Unit (CMU) on behalf of the Hong Kong Monetary Authority (HKMA).

Under the agreement, LCH will leverage Hong Kong’s payment-versus-payment (PvP) settlement solution, to extend its product scope to include the clearing and settlement of CNH FX options, forwards, swaps and spot transactions. The firm says the solution aims to enable full multilateral netting and guaranteed settlement, thereby removing a significant barrier to increased trading activity.

“CNH volumes have grown exponentially in recent years as the currency becomes more internationalised,” says Andrew Ng, group head of global financial markets at DBS Bank. “This is a major development which will support financial institutions across multiple jurisdictions who want to trade CNH derivatives and benefit from the risk and margin efficiencies of clearing.

Further, LCH’s expansion of eligible collateral to include Chinese Government Bonds will be a particularly important step in the development of the CNH derivatives market,” he adds.

LCH ForexClear and CMU OmniClear also say they plan to explore the inclusion of other currencies based on initial market adoption and demand. The new offering is expected to be available in the first half of 2026, subject to regulatory approvals, and will allow settlement netting of trades executed in entities incorporated outside of Hong Kong.               

In response to customer demand, LCH says it will also look to expand its range of eligible collateral in 2026 to include CNH-denominated Chinese Government Bonds (CGBs), which will be settled and held in the CMU, pending regulatory submission and approval. This initiative follows LCH Limited’s recent announcement that it had begun accepting USD and EUR-denominated CGBs, held in Euroclear Bank. With increasing participation from members and clients in the region, it says the eligibility of CGBs will facilitate their ability to meet initial margin requirements more efficiently.  

“The collaboration between CMU OmniClear and LCH demonstrates the strong demand from global investors for CNH-denominated debt securities, derivatives and related risk management tools,” says Stanley Chan, CEO of CMU OmniClear. “It also highlights the unparalleled role of Hong Kong’s payment and settlement infrastructure in supporting investment in CNH-denominated debt securities by investors from all over the world. We are pleased that CGBs held in Hong Kong’s central securities depository infrastructure will, for the first time, be accepted as eligible collateral outside of Hong Kong.”

Noting “significant increases” in FX options and FX forwards trading volumes for the Chinese yuan, LCH says it anticipates substantial demand among financial institutions to clear this currency, as they look to benefit from robust risk management and capital efficiencies. To meet this, LCH says it has expanded its presence in APAC across both its ForexClear and SwapClear services, with 24 direct members and over 180 clients, reflecting a 31% and 24% year-on-year growth in number of trades cleared in Q1, respectively.