SwapClear for Clients

Based on SwapClear’s successful clearing model, we have launched a new Client Clearing Service. The new solution has added functionality to support the segregation of client portfolios and margin. The advent of SwapClear client clearing service means that, for the first time, the buy-side community has access to clearing for interest rate swaps.

Benefits to Clients

The SwapClear client clearing service has been structured to deliver the following benefits:

Reduced exposure of clients to counterparty credit risk.

Segregation of client margin to mitigate the impact on clients in the event of their SwapClear clearing member defaulting.

Portability of trades to enable continued performance of swaps trades in the event of their SwapClear clearing member defaulting.

Additional protection from a deed of assignment between client and SwapClear clearing member granting a security interest in respect of the relevant client account.

Early return of collateral in the event of a default. SwapClear rules are designed to enable the early return of surplus collateral.

Unique client segregation offering a superior level of protection with an individual segregated account option.

Clients will also benefit from existing features of the SwapClear service:

Client clearing trade process

To submit a trade for clearing, the client and executing  broker will affirm the trade via MarkitSERV2. The trade will subsequently be ‘given up’ by both sides to the client’s chosen SwapClear clearing member3 who will clear the trade through LCH.Clearnet.

The execution and subsequent give-up process will be governed by the documents between the executing broker, client and SwapClear clearing member. All subsequent trade events, such as novations and partial novations, will be handled by the SwapClear clearing member without any involvement from the executing broker.

Block Trades and Fund Allocations.

The give-up process can include fund splits. This allows a fund manager to negotiate a single block price with an executing broker and subsequently enter the allocations into MarkitSERV. The SwapClear clearing member then clears the  client trades as allocated.

2 Clients will either use the Markit Wire interface directory or the MarkitSERV portal, which will be available shortly after the launch of the service.

3 Clients may appoint one or more SwapClear clearing members.

SwapClear for Clearing Members