LONDON, March 22 (IFR) - Amundi has become the first
European buyside client to begin clearing credit default swaps
through CDSClear, LCH’s Paris-based clearinghouse.
The investment firm, which manages over €1trn of assets
globally, is clearing index and single-name CDS trades on the
platform, via broker BNP Paribas. A further two clearing brokers
are planning to offer the service to their clients during the
The latest development comes almost four years after the
InterContinental Exchange began offering client CDS clearing in
Europe, and is the latest step as LCH plays catch-up with its
larger US rival.
ICE has cleared more than US$87trn gross notional of index
and single-name contracts since 2009 across its European and US
platforms – including US$26trn from buyside firms. CDSClear,
which began operations in 2012, has cleared just over €1trn of
Although CDSClear has had the technical capabilities to
offer clearing to buyside clients for some time, the launch
reflects growing demand as end-user firms seek enhanced
counterparty risk management and improved capital and
operational efficiencies amid a tightening regulatory
“We are committed to offering our customers a comprehensive
product offering to effectively manage risk, and this approach
is proving popular among market participants looking to realise
the benefits of clearing,” said Frank Soussan, global head of
From September, the cost of uncleared over-the-counter swaps
is set to increase as all financial firms will be required to
post variation margin against trades that are not cleared
through central counterparties.
For Amundi, LCH’s portfolio margining capabilities were a
key consideration, providing the firm with the ability to offset
risk of correlated contracts and make margin savings.
“Risk management is a top priority for us and our investors,
and by clearing through LCH we are able to benefit from an
experienced and robust CCP, that proved instrumental in
accompanying us on mandatory clearing,” Emmanuel Gaffet, head of
dealing risk management at Amundi, said in a statement.
Amundi was already a client of LCH, clearing its interest
rate swaps through the SwapClear service.
The most liquid CDS credit index contracts are mandated for
clearing under the European Markets Infrastructure Regulation
and Dodd-Frank in the US. The SEC has yet to finalise similar
rules that would force single-name contracts into clearing.
In December 2015, however, a group of 24 investors signed a
commitment to clear single name CDS trades voluntarily, as part
of a wider attempt to bolster liquidity in the asset class.
Until now, they have had little choice over clearing venues.
“This launch is an important development for us and the
industry as it gives buyside firms more choice of where to clear
their CDS contracts, following the introduction of the
non-cleared margin requirements and credit clearing mandate in
Europe,” said Raphael Masgnaux, global head of prime solutions &
financing at BNP Paribas.
Through CDSClear, LCH clears 124 index series and more than
480 single-name CDS, including financials. Earlier this year,
the French clearinghouse was authorised as a registered clearing
agency by the SEC, enabling the firm to offer single-name CDS
clearing to US clients through futures commission merchants.
As part of LCH SA, CDSClear is subject to a possible
acquisition by Euronext. The pan-European exchange has agreed to
take control of LCH SA for £510m in the event of a successful
takeover of the London Stock Exchange Group, LCH's parent, by
That US$14bn deal appears to be on the brink of failure,
however, with the CDS clearinghouse set to remain in LCH's grip
after LSEG refused to bow to regulatory pressure to offload its
Italian bond trading platform, MTS. A formal decision is due on
(Reporting by Helen Bartholomew)