Schroders has become the first European asset manager to clear through LCH ForexClear, with member Citi serving as clearing broker.
The asset manager cleared non-deliverable forwards (NDFs) across Asian and South American currency pairs.
NDFs are used to hedge or speculate against currencies where exchange controls make it difficult for overseas investors to make a physical cash settlement, for example, the Chinese renminbi.
ForexClear provides risk management for foreign exchange (FX) NDFs, FX options, FX spot and FX swaps & FX forward outrights.
In Q3 2022, the company’s non-deliverable FX client clearing volumes increased 146% year on year to USD $140 billion.
Total notional was up 17% from Q3 2021, with $19.1 trillion cleared, according to Eurex
“With Phase 6 of the Uncleared Margin Rules (UMR) implemented from September 2022, ForexClear has seen a growing number of firms choose to clear their FX trades,” said James Pearson, head of ForexClear, LCH.
He added, “We warmly welcome Schroders as the first European asset manager as it looks to benefit from the margin, capital, operational and credit efficiencies available through FX clearing. We look forward to partnering with Schroders and others in expanding our product offering from NDFs to also include options, forwards & swaps.”
Stephanie Whitford, global head of derivatives services at Schroders, adds, “Implementing ForexClear is an important step in increasing our central clearing capabilities for our global clients.
ForexClear offers increased transparency, reduces counterparty risk and strengthens liquidity in the FX market. Schroders are delighted to be the first European asset manager utilising this service and will be looking to increase our client and clearing broker usage over the coming months.”
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