Bloomberg News

LCH.Clearnet Says It Processed $826 Million of Default Swaps

April 08, 2010

LCH.Clearnet Group Ltd. said it processed 620 million euros ($826 million) of credit-default swaps in its first week of operating a European clearinghouse service.

LCH.Clearnet cleared 22 contracts after starting operations through its Paris-based unit on March 29, the company said on its Web site.

Lawmakers and regulators have urged clearing as a way to make the $605 trillion over-the-counter derivatives market safer after Lehman Brothers Holdings Inc.’s bankruptcy and the U.S. bailout of American International Group Inc. (AIG:US) LCH.Clearnet, which provides guarantees for about half of Wall Street’s interest- rate swap transactions, joins the battle to clear a market dominated by Intercontinental Exchange Inc. (ICE:US)

Eurex, Europe’s largest futures exchange, and CME Group Inc., the world’s biggest futures market, are also competing to clear default-swap trades. NYSE Euronext’s (NYX:US) London-based Liffe futures market, which was the first to offer clearing for the market in Europe, stopped investing in its European program after the service failed to attract any business.

Capitalized by its members, a clearinghouse reduces the default risk between parties to a trade. It also allows regulators to assess market positions and prices.

Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.

To contact the reporter on this story: Nandini Sukumar in London at nsukumar@bloomberg.net.

To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net.


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Companies Mentioned

  • AIG
    (American International Group Inc)
    • $51.72 USD
    • -0.26
    • -0.5%
  • ICE
    (Intercontinental Exchange Inc)
    • $190.72 USD
    • -1.50
    • -0.79%
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