Blended rates to expand trades

LCH.Clearnet’s SwapClear service is introducing a new blended rate compression service.

The compression enables market participants to reduce the overall notional and number of line items in portfolios by netting trades. The offering will expand eligible trades.

The increasing impact of mandatory clearing and the proposed introduction of capital ratios under Basel III has created an incentive for financial institutions to reduce the level of notional swaps outstanding at the clearing house.

Daniel Maguire, global head of SwapClear, said: “Managing balance sheet exposure is a top priority for all financial institutions. The introduction of a new blended rate compression service is an innovative response to these challenges, delivering significant efficiencies and cost savings for all participants.”

“The benefits of compression are far-reaching and its impact is rapidly replacing notional outstanding as a benchmark of [central counterparty] performance.”

Michelle Neal, global head of listen derivatives, markets clearing and FIC market structure at Deutsche Bank, said: “Blended rate compression provides members with the flexibility to perform significant amounts of compression on their cleared portfolio at LCH.Clearing, and it is a welcome development for the industry.”

Steven Mahoney, managing director of Credit Suisse, said: “Blended rate compression is an all-round win. It reduces the size of client portfolios therefore allowing the economic risk to be more closely aligned with the bank’s resulting leverage ratio calculation.”