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News: LCH SwapAgent completes its first swaption trade

15 November 2018 | Bill Hodgson

LCH SwapAgent completes its first swaption trade

  • Deutsche Bank and Nomura are counterparties to the first swaptions trades processed through LCH SwapAgent
  • Trades were brokered by ICAP as interdealer broker
  • LCH SwapAgent offers standardised infrastructure and efficiencies to the non-cleared derivatives market

LCH SwapAgent, a service for the non-cleared derivatives market, today announced that it has processed its first swaption trade. Two swaptions trades were completed between Nomura and Deutsche Bank, one denominated in Euro and the other in US Dollars. The trades were brokered by ICAP, part of TP ICAP group, and processed by MarkitSERV.

A European style swaption gives a buyer the option to enter an interest rate swap contract on a fixed date at a specified fixed rate. LCH SwapAgent offers processing for swaptions denominated in Euros or US Dollars. Swaptions are the latest addition to LCH SwapAgent’s product offering for the non-cleared derivatives market, which includes cross-currency basis swaps, as well as interest rate swaps, FRAs and inflation swaps.

Aaron Mayor, Head of New Product Development, Rates, LCH, said: “We are excited to launch USD and EUR swaptions in partnership with the market. We support the alignment of swaptions settlement and collateralisation with the cleared swap market and have launched swaptions in SwapAgent with NPV based settlement in both USD and EUR.”

Martial Collet-Billon, Head of EUR Rates Exotics Trading, Deutsche Bank, said: “Deutsche Bank is delighted to be entering the first Swaption trade into the SwapAgent service. SwapAgent offers multiple benefits to all market participants, including standardised discounting and the balance sheet benefits associated with STM methodology. We are continually looking for ways to be more efficient and provide a better service to our clients, and SwapAgent is helping us to achieve that.”

Chris Wells, Managing Director, EMEA Head of Middle Office, Nomura, said:  “The SwapAgent framework enables significant improvements in the processing and settlement of uncleared OTC Derivatives. Nomura is pleased to be one of the first counterparties to book a swaptions trade using this new service and see this as a significant milestone in the industry’s drive for efficiency.”

LCH SwapAgent provides infrastructure to support and improve efficiency of the processing, margining and settlement of non-cleared derivatives. This includes valuation for margining purposes. LCH SwapAgent’s valuation methodology for EUR swaptions is based on the NPV of the underlying cleared swap referred to as collateralized cash price settlement, rather than the unadjusted par yield curve, which had been the previous market convention for EUR swaptions.


The Secret Swap Agent is the first person on the left in the photo. I'm told.