Foreign Exchange

Managing Risk in the FX market - a new solution

Financial markets are currently undergoing a period of unprecedented regulatory reform. Since the Lehman Brothers collapse, market weaknesses have been under intense scrutiny from financial institutions and regulators alike.

A key area of proposed legislation is mandatory central clearing for some OTC derivative instruments, including foreign exchange.

After in-depth research and analysis of the FX derivatives market and its inherent risks – and in close collaboration with leading market participants – we’ve launched a new, custom-built non-deliverable FX forward (NDF) clearing solution, ForexClear.

ForexClear has been designed to deliver the enhanced functionality and robustness the FX business needs in today’s challenging regulatory and capital-intensive environment.

At launch, ForexClear covered the most actively traded currencies in the NDF marketplace. Subsequent releases have expanded the product set to cover 95% of the NDF market and provide the continuous registration of trades. Our next major release will be to provide a client clearing service and then later to include a broader range of OTC foreign exchange products such as NDOs, FXOs, NDF crosses, Forwards and Swaps (pending regulatory approval).

Key Benefits

• Mitigation of counterparty credit risk - delivering improved operational efficiency

• Multilateral risk netting - reduces portfolio exposure and ultimately lowers initial margin

• Improved STP workflow management - resulting in reduced operating risks and costs

• A unique LCH.Clearnet default management process - specialist member participation for efficient and orderly liquidation in which the defaulter pays

• All the benefits of an OTC traded market - combined with the post-execution advantages of a cleared environment

• A flexible and progressive service  - developed in partnership with our members to meet the demands of the market
   

A complete, end-to-end clearing solution

With our extensive strategic partnerships and internal developments ForexClear has been designed to deliver a complete, actively managed ‘end-to-end’ clearing service. From the point of execution and submission to the trade matcher, we offer an inclusive post-trade processing, collateral management and settlement solution.