ForexClear Hits New Peak Amidst Strong Year for LCH
Posted by Colin Lambert. Last updated: January 19, 2023
LCH’s ForexClear service cleared a new high of $24.8 trillion in notional FX volumes in 2022, as part of broader growth in the clearing business.
Overall cleared notional volumes were up 14% on 2021, the clearing house also saw a record $516 billion notional cleared by clients, up 112% on 2021, and $1.01 trillion notional in FX options for the first time in a single calendar year.
LCH says growth is expected to continue with the service having launched clearing for USD/JPY and EUR/JPY FX options, indeed sources say that the start of 2023 has seen a record week for FX options clearing with over $35 billion in notional processed.
In May 2022, ForexClear and its divisional partners within LSEG, which owns LCH, announced plans to launch the NDF matching platform in Singapore. The firm says integration of clearing into the design of the NDF matching platform creates a trading platform where market participants can decide on a pre-trade basis to clear their NDFs. Last year also saw ForexClear process its first client trades through FXall and FX Connect TradeNeXus. More than 50 clients are now live, the firm says, including Schroders, the first European asset manager to clear with ForexClear.
Elsewhere at LCH, SwapClear registered a record 8.2 million trades in 2022, up 20% from 2021. Total notional cleared at the service increased 18% year-on-year to reach over $1 quadrillion, with clearing of inflation swaps reaching a record notional high of $9.3 trillion in 2022.
LCH says as testament to the progress made in the transition to risk-free rates (RFRs), cleared swap liquidity has grown considerably over the last 12 months – with over 80% of all new USD swap risk cleared at SwapClear being SOFR-based. This compares to less than 10% in Q2 2021. SwapClear has also supported the move to RFRs in the Nordics by extending clearing eligibility to Swestr (Swedish krona short-term rate) overnight index swaps (OIS) and Destr (Denmark short-term rate) OIS.
SwapAgent saw a 130% year-on-year increase with over $3.9 trillion of notional registered. Further supporting the industry’s transition to RFRs, SwapAgent registered its first Cibor/SOFR cross-currency basis swap between two Nordic banks, Nordea and Danske. Cross-currency volumes across the service reached record highs with $2.7 trillion of notional registered in 2022, including a 112% increase in JPY cross currency volumes.
“LCH has continued to deliver resilient multi-asset post trade services to its customers and members during a year when markets have seen significant volatility,” says Daniel Maguire, group head, post trade at LSEG and CEO of LCH Group. “The record volumes achieved across our services are testament to our customer centric approach and partnership with the market to ensure they are supported through the benefits of clearing.
“With milestone events such as the cessation of US dollar Libor impacting the market in 2023, we will continue to partner with our customers and members to provide robust risk management, capital efficiencies and operational benefits,” he continues. “The acquisitions of Acadia and Quantile will also add to our strategy to enhance and grow our multi-asset post trade offering for the uncleared derivatives market.”