The bank has processed its first NDF trade through the service and becomes the third new clearing member to join LCH ForexClear in the past 12 months.

Wells Fargo will now be able to benefit from ForexClear’s offering, including margin, liquidity and netting opportunities.

“As we continue to expand our offering to financial institutions globally, following the addition of two new members from Asia and Europe in 2023.

Their membership reinforces our commitment to providing leading FX clearing and financial resource and risk management services to the FX market, as a growing number of firms increase their cleared flow,” said Andrew Batchelor, head of ForexClear, LCH.

LCH ForexClear has experienced growth across its service this year, having achieved record NDF average daily volume (ADV) of $132 billion cleared in June this year, up 33% year-on-year.

Elsewhere, FX options ADV at ForexClear was up 126% year-on-year to $22 billion in June.

“Given the strategic growth of our FX platform over the last few years, it was important to unlock the margin and capital efficiencies provided through ForexClear,” said Vincent Hindman, head of foreign exchange at Wells Fargo.

“As more interbank and client volume continues to migrate towards NDF clearing, this will allow us to further mitigate counterparty credit risk and lower costs through multilateral risk netting.”

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The service, which went live on 15 November, selects existing uncleared trades to move to LCH ForexClear alongside optimising portfolios with new rebalancing trades to reduce counterparty risk and the financial resources a participant must hold.

The optimisation is fully customisable, allowing participants to control their risk and resource changes, as well as preferred currency pairs and trading partners. In addition, portfolios can also be potentially compressed to significantly reduce trade count and notional.

Moving FX Forwards into LCH ForexClear will also allow participants to benefit from multilateral netting, lower counterparty risk weights and settled to market (STM) treatment, which in turn helps reduce capital requirements and counterparty risk.

Quantile’s optimisation then ensures the risk reduction is achieved within the relevant initial margin (IM) and risk constraints.

“We are pleased to have pioneered FX Smart Clearing with LCH ForexClear, and would like to thank our clients for their participation and support in the first live run,” said Esben Urbak, head of product at Quantile.

“By using Quantile’s optimisation to intelligently clear risk, we can now drive new levels of capital reduction and enable participants to access the benefits of clearing in an extremely operationally efficient way.”

FX Smart Clearing was developed to meet customer demand for solutions which simultaneously manage counterparty risk, IM and capital.

The introduction of SA-CCR has increased capital requirements for FX which creates a new incentive to clear, assuming the differences in cleared and uncleared IM are appropriately managed, according to the firms.

“LCH ForexClear is a very efficient place to hold risk, and by leveraging Quantile’s optimisation service, we can now significantly reduce capital and funding requirements under SA-CCR for our members,” said Andrew Batchelor, chief operating officer and head of product at LCH ForexClear.

“We look forward to welcoming more participants to the live service so they can benefit from the strong network, improved capital efficiency and further optimisation benefits from facing a CCP.”

Quantile and LCH ForexClear will be offering regular FX Smart Clearing runs early next year for FX Forwards, with other cleared products expected to be added.

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This collaboration with LCH ForexClear – part of the London Stock Exchange Group’s post trade division – will also help banks overcome other risk measures in the FX market – including those related to FX forwards, FX swaps, and cross-currency swaps.

In practice, Capitolis’ post-trade optimisation technology locates the optimum capital and funding state between cleared and uncleared markets, moving optimised trades where fits best.

Its proprietary technology “optimises capital risk-weighted assets and funding requirements for the OTC FX market to mitigate counterparty credit risk across global banks”.

James Pearson, head of LCH ForexClear, highlighted how through this connection an increased number of users will benefit from FX Smart Clearing and thus “enable 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,” he added.

Capitolis reached a network yield of 42% of total funding costs – including capital funding – during a proof-of-concept with nine global banks.

Following this, the company is set to roll-out the service alongside LCH ForexClear to help global banks reduce capital burdens and balance margin requirements. With this functionality, Capitolis plans to add additional banks into future FX Smart Clearing exercises.

Gil Mandelzis, chief executive and founder of Capitolis, said: “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.”

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Standard Chartered provides international banking services across emerging markets in Asia, Africa and the Middle East, while IndusInd Bank provides corporate banking services across India.

The move becomes IndusInd Bank’s first clearing of over-the-counter (OTC) FX at ForexClear.

LCH’s FX client clearing service has seen continued growth, with Standard Chartered the latest institution to provide clients with access to clearing benefits and risk management services offered through ForexClear. IndusInd Bank becomes the second Indian bank to clear at ForexClear.

A total of 20 entities currently provide client clearing support at ForexClear, a 67% increase from 2021.

“We are delighted to have partnered with IndusInd Bank and process our first NDF client trade at LCH ForexClear, said Andy Ross, global head of prime brokerage at Standard Chartered.

“Through our use of the service, we can support a broader range of market participants, enabling them to benefit from reduced operational complexity, robust risk management and increased liquidity.”

The move furthers LCH’s commitment to servicing clients in the APAC region. In 2022, clients at ForexClear cleared a record $516 billion notional, with 69% from APAC clients. 

In addition, ForexClear registered a 50% increase in clients accessing ForexClear from APAC in 2022, as well as a 41% year-on-year increase in APAC client trades cleared.

“Participating in this trade with Standard Chartered enables IndusInd Bank to benefit from the capital and margin efficiencies that clearing through ForexClear offers. We are pleased to be using this service and expanding our connectivity to the FX market,” added Siddharth Banerjee, head of global markets and FIG at IndusInd Bank.

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The asset manager cleared non-deliverable forward (NDF) trades across a wide range of Asian and Latam currency pairs. ForexClear member, Citi, facilitated the trades as Schroders’ clearing broker.

LCH ForexClear has seen continued growth within its FX client clearing services, with increasing numbers of buy-side firms acknowledging the importance of margin and operational efficiencies, as well as enhanced risk management available through FX clearing.

“With Phase 6 of the Uncleared Margin Rules implemented from September 2022, ForexClear has seen a growing number of firms choose to clear their FX trades,” said James Pearson, head of ForexClear, LCH.

“We warmly welcome Schroders as the first European asset manager as it looks to benefit from the margin, capital, operational and credit efficiencies available through FX clearing. We look forward to partnering with Schroders and others in expanding our product offering from NDFs to also include options, forwards and swaps.”

In the first nine months of 2022, LCH ForexClear registered a record $19.1 trillion cleared in total notional, up 17% year-on-year.

In Q3 this year, LCH ForexClear experienced a record quarter for non-deliverable FX client clearing volumes at $140 billion, 146% higher than in Q3 last year.

“Implementing ForexClear is an important step in increasing our central clearing capabilities for our global clients,” said Stephanie Whitford, global head of derivatives services at Schroders.

“ForexClear offers increased transparency, reduces counterparty risk and strengthens liquidity in the FX market. Schroders are delighted to be the first European asset manager utilising this service and will be looking to increase our client and clearing broker usage over the coming months.”

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Paddy Boyle joins the FinTech looking to deliver a real-time clearing and settlement service for crypto and digital assets to institutional clients.

He will be charged primarily with further building out the clearing capabilities for the firm and enabling optimal institutional investor adoption amid a continuing trend.

Boyle brings two decades plus of financial markets experience to Bosonic. He spent 16 years at Goldman Sachs as global head of FX options, co-running businesses on hybrid products combining FX with equities, precious metals, oil, and interest rate derivatives desks.

More recently, Boyle was a managing director at LCH and global head of ForexClear, the London Stock Exchange’s FX clearing service, where he increased volumes 15x in less than five years, according to Bosonic.

He also acted as consulting partner at Turing Experts where he was sole expert witness on a large regulatory investigation in the FX market.

“Bosonic has built a unique and much-needed platform and I am excited to help build out the derivative and clearing functions of the business,” said Boyle.

The appointment comes two months after former BNY Mellon, HSBC and Euroclear strategy and innovation specialist Jason Nabi joined Bosonic as chief revenue officer. 

“We could not have asked for a more qualified individual to lead our charge into the fast-growing derivatives arena and Paddy brings a vital new dimension to our offering and value proposition,” said Rosario Ingargiola, Bosonic CEO, who Boyle will report into. “Bringing on someone with his calibre and proven track-record to follow on from Jason joining us demonstrates our clear intent to be a leading player and the pent-up demand for what we have to offer.”

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LCH ForexClear said Societe Generale will act as Hana Bank’s clearing broker under the arrangement, which will allow Hana Bank to manage risk and gain margin, capital and operational efficiencies.

James Pearson, head of LCH ForexClear, commented that as phase five of the uncleared margin rules approaches this September, clearing firms have been increasingly looking to optimise their derivatives portfolios.

“South Korea has a vibrant FX and derivatives market and we are delighted to welcome Hana Bank as the first from the country to clear at ForexClear,” he added.

Pearson took up the role as head of ForexClear at LCH last month overseeing trading risk, daily management and the strategic direction of the business. He was previously global head of FX trading for five years before his departure in 2016.

LCH ForexClear has been expanding its list of client clearing firms with UK investment bank Barclays the first to offer client clearing through the international clearing broker model with the central counterparty in April. The move provided Barclays’ clients with clearing of FX derivatives for risk management.

“Having access to ForexClear allows us to effectively manage our risk while benefitting from a number of efficiencies associated with clearing,” Youngsun Moon, head of FX and derivatives trading section at Hana Bank, commented. “We are pleased to be the first Korean bank to use the service, and believe this will help us to expand our position as the best foreign exchange provider in Korea to the global market.”

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London-based clearing house LCH has appointed a former global head of foreign exchange trading at RBS to head up its ForexClear business, effective from June 1.

James Pearson joins LCH as head of ForexClear in London where he will be responsible for the trading risk, daily management and strategic direction of its FX business, reporting to CEO of LCH, Isabelle Girolami. 

Pearson has nearly 20 years of industry experience, having previously worked as global head of FX trading at RBS for just under five years before his departure in 2016.

Prior to RBS, he also held roles as global head of G10 FX spot trading and head of EMEA emerging markets FX at Nomura and Lehman Brothers, as well as, holding roles on the FX spot and non-deliverable forwards trading desks at Citi and HSBC.

“I am delighted to welcome James to LCH as Head of ForexClear. He brings extensive experience of trading FX and leading global teams,” commented Girolami. “He will be instrumental in driving continued growth and innovation at ForexClear, with a focus on expanding the deliverable FX and client clearing franchises.”

LCH ForexClear cleared $19.1 trillion last year, attracting the interest of Goldman Sachs and Barclays which both moved to offer client clearing on ForexClear in August and April respectively. 

Earlier this year, ForexClear also went live clearing non-deliverable options in addition to its existing offering of non-deliverable FX forwards, deliverable FX options and deliverable FX forwards.

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Quantile recently expanded its offering enabling firms to rebalance their initial margin (IM) for eight new G10 currency pairings cleared with LCH’s ForexClear.

By being the first vendor to offer this service, it aims to deliver increased capital and margin benefits to participants, including Goldman Sachs, trading in over the counter (OTC) FX derivatives.

“We were pleased to see the speed with which the additional cleared currency pairs were incorporated into Quantile’s optimisation runs, following their launch at LCH ForexClear,” said Jessica Bateson, executive director at Goldman Sachs.

“We actively seek to participate in solutions that aid greater risk reduction across both sell-side and buy-side communities, and believe that cleared FX optimisation, together with increased industry participation in these runs, will drive new levels of efficiency.”

Quantile said the inclusion of these new cleared currency pairs would bolster its suite of optimisation services, which it claimed reduced initial margin postings across asset classes by over $10 billion on average.

“We are seeing a continued growing global demand for OTC FX clearing and have worked with the market to expand LCH’s cleared offering to a broad range of FX derivatives,” said Ankeet Dedhia, head of product for the Americas at LCH ForexClear.

“Optimisation services are an important part of the post-trade process and complement the benefits of clearing in delivering increased capital, margin and operational efficiencies to market participants globally.”

Last year, Quantile added cleared interest rates to its service after completing its first cleared interest rate initial margin optimisation run with LCH.

The optimisation specialist said the recent run saw 14 market participants rebalance their interest rate portfolios, with four of them using the new cleared functionality, to generate margin savings of $4 billion.

“We believe optimisation and clearing are complementary to one another. Clearing houses are one of the most efficient places to hold risk, and our optimisation engine continues to seek out efficiencies which free up scarce capital and reduce the costs of trading for our clients,” added Varqa Abyaneh, chief product officer, Quantile.

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LCH confirmed that Barclays was the first institution to clear a client trade under the broker model, and the bank is now offering clients clearing of FX derivatives for risk management with ForexClear.

“Being the first clearing broker to clear an EMIR/SCM Model trade is another key step in the evolution of our OTC Clearing platform, highlighting the continued investment and market leadership Barclays has in this space,” said Gary Saunders, global head or prime derivatives services at Barclays.

Saunders added that expanding ease of access to cleared products is vital in the bank’s aim to manage counterparty risk and improve margin efficiency.

Figures from LCH revealed that ForexClear processed $19.1 trillion in cleared notional, with $167.2 billion of that cleared by clients. ForexClear supports client and dealer-to-dealer clearing for FX NDFs and options, deliverable FX options, spot, and forwards.

In January, JP Morgan and Deutsche Bank were the first members to clear newly launched non-deliverable FX options across nine currency pairs at LCH ForexClear.

Barclays joins other major institutions offering client clearing with LCH ForexClear, including US investment bank Goldman Sachs which began offering the service in August.

“We are delighted to welcome Barclays to our growing FX clearing service and look forward to continuing to work with Barclays and its clients to support their clearing activity,” Tamaryn Nuttal, chief operating officer at LCH ForexClear, commented.

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