SwapClear Service Opening Hours
The SwapClear Service typically will be open every day, except weekends, Christmas Day, New Year's Day and Good Friday. Trade registration will be available from 09:00 Sydney time on Monday to 19:00 New York time on Friday. For full details of SwapClear opening hours, please refer to section 1.2 and section 2.1.2.
Trade execution
The first step towards clearing an interest rate swap at SwapClear is to execute a rates trade in the marketplace with another counterparty.
In the US, the Dodd-Frank Act mandates that certain interest rate swaps be traded on a trading venue registered as a swap execution facility (SEF) or a designated contract market (DCM).
However, not all rates products that we clear are required to be traded on a SEF or DCM. Some clearable instruments can be traded bilaterally directly with another counterparty, such as a swap dealer.
Comparable rules were implemented in the EU in January 2018. Under the MiFID II directive and MiFIR regulation, certain interest rate swaps are obliged to be traded on trading venues which are regulated markets, multilateral trading facilities (MTF) or organised trading facilities (OTFs).
To date, SwapClear has established connectivity with 40 execution venues.
Trading venues can connect to SwapClear via a middleware provider, such as MarkitWire and Traiana or through ClearLink, our proprietary direct connectivity platform. Venues may opt to connect through multiple connections via ClearLink.
Trading venues are required to complete an extensive onboarding process whether connecting directly or indirectly to the clearing house.
See below for list of the venues currently onboarded to SwapClear and their connectivity methods:
| Venue | Entity | Direct | Indirect |
|---|---|---|---|
| BGC | Aurel BGC SAS | Yes | |
| BGC Brokers L.P. | Yes | ||
| BGC Derivative Markets, L.P. | Yes | ||
| BGC Partners, Inc. | Yes | ||
| Sunrise Brokers LLP | Yes | ||
| Bloomberg | Bloomberg SEF LLC | Yes | Yes |
| Bloomberg Trading Facility Limited | Yes | Yes | |
| Bloomberg Trading Facility B.V. | Yes | Yes | |
| CM Capital Markets | C.M. Capital Markets Brokage | Yes | |
| S.A., Agencia De Valores | |||
| Clear Markets | Clear Markets North America, Inc. | Yes | |
| Grupo CIMD | Corretaje E Información Monetaria y De Divisas, Sociedad De Valores S.A. | Yes | |
| Dealerweb | DW SEF LLC | Yes | Yes |
| ELX | ELX Futures, L.P. | Yes | |
| GFI | GFI Brokers Limited | Yes | |
| GFI Securities Limited | Yes | ||
| GFI Swaps Exchange LLC | Yes | ||
| GMG | GMG Europe B.V. | Yes | |
| HPC | HPC SA | Yes | |
| LatAmSEF | LatAm SEF, LLC | Yes | |
| MTS | MTSSwaps | Yes | |
| Nasdaq | Nasdaq Stockholm AB | Yes | |
| NEX | NEX Amsterdam B.V. | Yes | |
| NEX BrokerTec Europe Limited | Yes | ||
| NEX Limited | Yes | ||
| OTCX | OTCX Trading Limited | Yes | |
| TeraExchange | TeraExchange, LLC | Yes | |
| Tradeweb | Tradeweb EU B.V. | Yes | Yes |
| Tradeweb Europe Limited | Yes | Yes | |
| TW SEF LLC | Yes | Yes | |
| TPICAP | ICAP Global Derivatives Limited | Yes | |
| ICAP Securities Limited | Yes | ||
| ICAP SEF (US) LLC | Yes | ||
| ICAP WCLK Limited | Yes | ||
| ISWAP Euro B.V. | Yes | ||
| TPICAP (Europe) SA | Yes | ||
| tpSEF Inc. | Yes | ||
| Tullet Prebon (Europe) Limited | Yes | ||
| Tradition | Tradition (UK) Limited | Yes | |
| Tradition Securities and Futures | Yes | ||
| Tradition SEF, Inc. | Yes | Yes | |
| Tradition Financial Services España | Yes | ||
| Sociedad de Valores S.A.U. | |||
| YieldBroker | YieldBroker PTY Limited | Yes | |
| 42 Financial Services | 42 Financial Services a.s. | Yes |
Client workflow
The process of how a client trade is submitted and registered at LCH is straightforward.
The workflow below illustrates the trade registration process for a trade executed between a client and an executing broker (EB).
- The client and EB agree a trade that is affirmed either through a middleware or a trading venue.
- The fully matched trade is submitted to clearing. A trade validation check is carried out.
- If the trade is deemed as valid, the clearing broker will receive a message and either accept or reject the trade. If accepted and there is sufficient collateral available to cover the incremental margin requirement the trade will then be novated to the clearing house.
Note:
If the trade was originally executed “On-venue” on a SEF, DCM, MTF, OTF, QMTF or RM and passes the eligibility checks, SwapClear will process the trade in a straight-through process (STP) fashion in accordance with the Clearing broker election. Acceptance messages will be issued to the trading venue. Clearing brokers are required to notify LCH of the trading venues it has onboarded. This information will be stored within LCH and utilised during the trade registration process (see grid below).
If the trade was executed Off-venue, submitted for clearing by a middleware provider and passes the eligibility checks, SwapClear issues a request acceptance message to the FCM or SCM, which then can accept the trade for clearing. Once the FCM or SCM accepts the trade, SwapClear sends an acceptance message back to the middleware.
After FCM or SCM issues acceptance, the trades are registered in SwapClear if sufficient collateral has been posted. If the trade fails, SwapClear issues a rejection message with the reason for rejection.
| Execution type | Venue | Election | Resulting Trade workflow |
|---|---|---|---|
| Trade executed on a SEF , DCM, MTF, OTF or RM | A | Approve | Auto process |
| Trade executed on a SEF , DCM, MTF, OTF or RM | B | Approve | Auto process |
| Trade executed on a SEF , DCM, MTF, OTF or RM | C | No | Rejection |
Approved Compression Service Providers
SwapClear can receive and process valid compression proposals created by Approved Compression Service Providers (ACSPs) (as defined in the applicable LCH rulebook).
Below is a list of the Approved Compression Service Providers (ACSPs) for SwapClear:
TriOptima AB
Quantile Technologies Limited
LCH requires all prospective compression providers meet the following criteria:
Meets the requirements to provide multilateral compression in accordance with LCH's rulebook
A potential ACSP has a robust legal framework under which to provide such compression services
A potential ACSP can demonstrate robust controls and operational capability
LCH can operationally support the proposed compression services
A potential ACSP has written confirmation of commitment from at least six SwapClear clearing members to use their compression services
A potential ACSP can demonstrate successful testing of its compression services with a minimum number of potential participants
ACSP minimum onboarding steps
Having a suitable NDA in place for discussion on a prospective ACSP's proposed compression services
LCH validates that the above minimum criteria have been met
Established with LCH an ACSP compression documentation under which such service will operate along with LCH Rulebook
Established a service agreement with LCH on which to operate and any agreed legal and commercial arrangements
Successfully complete testing phases required by LCH
LCH's receipt of all risk and regulatory approvals required to onboard the prospective ACSP
The anticipated duration from once the criteria set forth above have been met is between three to six months, depending on the ACSP's ability to satisfy the above criteria.
ACSP membership choice
Once the prospective ACSP has satisfied the above criteria, it may elect a Silver or Gold membership. ACSPs will be required to pay a once-off onboarding fee of £75,000 to cover LCH’s costs to support its compression services and the operational, legal and sales efforts to onboard the ACSP.
Where an ACSP’s compression cycles have terminated at least 1,000,000 trades sides in a given calendar year, that ACSP is eligible to apply for Platinum ACSP status, as described below. In the event a Platinum ACSP does not maintain the minimum number of terminations required for Platinum status in a given calendar year, LCH will retroactively charge the ACSP the applicable membership applicable fees for Gold membership. Choice of applicable membership can be elected annually from 1 November to 15 December each year. In the event an ACSP does not elect a membership plan by 15 December, the ACSP will be deemed to have elected a dormant membership plan.
| Commercial model for ACSP |
Silver |
Gold | Platinum |
|
|---|---|---|---|---|
| 1 | Once-off onboarding fee (required for all new ACSPs) |
£75,000 | £75,000 |
NA |
| 2 | Annual ACSP fee (refunded if the ACSP terminates 1,000,000 trade sides within the calendar year) |
£200,000 | £480,000 |
NA |
| 3 | Compression runs included in annual ACSP fee (subjected to member demand and operational constraints – no refunds if unused) | 8 |
24 | Subjected to member demand |
| 4 |
Average cost per run included in annual fee |
£25,000 | £20,000 |
NA |
| 5 | Charge for additional compression runs (above inclusion) in EUR, US$ or GBP. Additional runs will not incur this charge if they terminate at least 15,000 EUR or US$ trade sides, at least 8,000 GBP trade sides or 100 trade sides if it is an inflation-only run (EUR, US$ or GBP) |
£22,500 | £18,000 | NA |
| 6 | Charge for a EUR or US$ compression run that terminates fewer than 15,000 trades sides or a GBP compression run that terminates fewer than 8,000 trade sides. For inflation-only runs (EUR, US$ or GBP) this charge will only be applicable if fewer than 100 trade sides are terminated | N/A | N/A | £18,000 |
| 7 |
Min Participants in EUR, US$, GBP, JPY compression runs | 8 | 8 | 8 |
| 8 |
Min Participants in others currency specific runs |
6 |
6 |
6 |
| 9 |
Platinum qualification – min. number of trade side terminations from ACSP compression runs per calendar year based on previous 12 months |
NA | NA | 1,000,000 |
| 10 | If Platinum ACSP does not meet minimum trade side terminations target, then ACSP must revert to Gold status |
The terms of an ACSP’s appointment as such by LCH, including all fees, costs, expenses, minimum criteria and membership terms shall be subject to and governed by the relevant service agreement with LCH.
Note, LCH charges its clearing members and clients for using LCH ACSP compression services. For more information visit SwapClear fees.
LCH’s process for confirming proposed ACSP’s cycles
1. For the next quarter all vendors submit to LCH requests for runs including the date they want to perform a run and its currency or currencies.
- A vendor can only do one run a day
- A vendor can only perform one run in a currency with the same products per calendar week
2. Vendors all submit their requests by email on the same pre agreed day
- For Q1 – Second Wednesday of preceding November
- For Q2 – Second Wednesday of preceding February
- For Q3 – Second Wednesday of preceding May
- For Q4 – Second Wednesday of preceding August
3. LCH collates all the requested runs and identifies those which LCH cannot support, these being
Runs on days that LCH is not open
Runs on days that LCH believe is sensitive e.g. elections
Runs on days when LCH may be making a release
Others to be determined at LCHs discretion
4. LCH collates the eligible requested runs and confirms to the vendors which runs have been accepted by the following Wednesday. Acceptance and confirmation of request runs are subject to the following:
Where more than one vendor has requested to perform a run in the same currency on the same day, LCH will inform such vendors that these runs could be subject to constraints on the number of 'events' (each termination and new trade is an event) they can generate in the applicable run
Impacted vendors may choose to request different dates for runs and can work with LCH to identify appropriate, alternative dates
Runs may also be subject to event constraints depending on the combinations of currencies requested
5. Where runs will be subjected to event constraints, LCH will inform the impact vendors approximately a week before the applicable run as to the number of events each vendor is permitted to perform in each of their runs
Where a vendor’s run is subject to event constraints, the number of events a vendor may effect shall be limited based on (x) the number of events effected in the vendor’s previous run(s) in the relevant currency and/or (y) the number of eligible trades each vendor has in their cycle based on the participating members. Where two or more vendors are performing runs in the same currency on the same day a member can only participate in one of the cycles
6. LCH will publish the approved run schedule, including the date and currency[s] information to the vendors
Notwithstanding the above, LCH may allocate, cancel or reschedule compression runs in its discretion for operational, technical, risk or legal considerations
Scheduling of ACSP testing
LCH Limited (LCH) makes available testing functionality for all ACSPs that wish to test new products or services. LCH requires all ACSP testing to be booked with Rates Client Services. Please also note the following:
Testing must be booked at least two weeks and no more than two months in advance of the proposed testing date.
LCH may reject a request for testing on consecutive weeks where LCH has scheduled a service release or other operational or technology changes.
Testing will be scheduled on a ‘first come first served’ basis.
If testing is unavailable, LCH will make all ACSPs aware.
Approved LCH swap data repositories
DTCC Data Repository (U.S.) LLC
Bloomberg Swap Data Repository LLC (BSDR LLC)
For reporting purpose pursuant to CFTC regulations, including those under 17 CFR 45, SwapClear clearing members may only report details of SwapClear transactions to an approved swap data repository, which is set forth [above]. In the event a SwapClear clearing member, or client of a SwapClear clearing member, wishes to report to a swap data repository that is not an approved swap data repository, the SwapClear clearing member must provide reasonable prior notice to LCH to enable LCH to establish connectivity to that swap data repository.
After receiving notice, LCH will work with the non-approved swap data repository to establish and develop the technological and operational processes to enable LCH to report trade details, including terminations and modifications of transactions, to that swap data repository. Please note the process to connect to a non-approved swap data repository will not be immediate and will require a reasonable period of time. In the event a SwapClear clearing member, or client of a SwapClear clearing member, reports details of a SwapClear transaction to a non-approved swap data repository, or does not transmit all required trade details of a trade to be cleared at LCH, LCH will not be able to appropriately report the termination or modification of transactions submitted to LCH for registration.
Settlement Prices
Final settlement prices are published daily at 09:00 EST/14:00 London for swaps in all 18 currencies currently eligible for registration at LCH.
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