SwapAgent

SwapAgent is a service designed to simplify the processing, margining and settlement of non-cleared derivatives. SwapAgent benefits from LCH’s expertise in serving and managing risk for the cleared rates and FX derivatives market. It provides market participants various solutions designed to materially improve standardisation, efficiency and simplicity in the non-cleared derivatives market.

SwapAgent provides these solutions by extending the clearing infrastructure to the bilateral market without requiring novation to a central counterparty. So while trades managed by SwapAgent remain fully bilateral, they follow a similar operational process as cleared trades, including centralised trade processing, valuation, margining, risk calculation and optimisation services.

That way LCH can extend many of the efficiencies that customers have become accustomed to in the cleared market to the non-cleared market.

Standardisation of collateralisation document terms
Uniform end-to-end trade processing and life-cycle management
Independent valuation and dispute elimination for SwapAgent trades
Standardised risk factor calculations for bilateral initial margin calculations
Simplification and standardisation of the collateralisation and settlement process
Elimination of unnecessary payment flows (e.g. netting coupons and variation margin)
Increased ability to move trades between counterparties and to the clearing house without funding impacts driven by collateralisation term

SwapAgent Advatanges
Category	Bilateral SwapAgent	Bilateral Today	SwapClear
Standardised collateral documentation	Yes	No	Yes
Standardised trade processing	Yes	No	Yes
Independent valuation agent	Yes	No	Yes
Dispute elimination	Yes	No	Yes
VM/coupon/interest netting	Yes	No	Yes
Standardised risk factor calculation	Yes	No	Yes
Standardised payment processing	Yes	No	Yes
Cross-currency and swaptions	Yes	Yes	No
Central counterparty	No	No	Yes
Default fund	No	No	Yes

Compression alone at LCH has already reduced notional outstanding for cleared derivatives by more than US$200 trillion, saving an estimated US$25 billion in capital for the industry. By introducing such opportunities to the bilateral market, we are improving its sustainability.*

*Data provided by Group Operations

SAL = SwapAgent Limited

SwapAgent streamlines and standardises collateral documentation. We do this by introducing a service under which participants agree that standard collateralisation terms apply for trades submitted to SwapAgent.

We will introduce a new rulebook to cover this, similar in many ways to the existing clearing rulebook. Once a member signs up, trades submitted through SwapAgent are bound by its terms, including standardised amendments to existing collateralisation documentation, which members can choose to apply to their bilateral SwapAgent trades.