Best Banks Awards: LCH

Paddy Boyle, global head of LCH’s ForexClear, is no stranger to attending industry conferences, but recently he has noticed a significant shift. When he got back to the firm’s stand after speaking on a panel, there was a long queue of people waiting to find out more about foreign exchange clearing. “This was a first for me,” he says.

The surging interest in clearing has other signs too. After launching in 2012, ForexClear saw little demand for its non-deliverable forwards (NDFs) clearing service until 2016, and volumes going through the platform have since exploded.

Now, more than half of NDFs traded in the interbank market are cleared through LCH, with volumes rising 60% year-on-year to reach $70 billion a day as the number of participants increases. While initially it was the largest banks that pioneered the process, smaller dealers are joining in.

Buy-siders are keen to explore their options, as the phased roll-out of the uncleared margin rules continues, leaving just 22 months until the September 2020 kick-off when asset managers come under the obligations.

“The conversations we are having are much broader, with hedge funds, asset managers, execution venues, prime brokers and middleware providers all getting engaged,” says Boyle. As a result, he forecasts that participation and volumes still have scope to go up.

I really believe that looking back on this, the market will see FX options clearing as a seismic turning point for FX

Paddy Boyle, LCH’s ForexClear

In July, LCH, which has been voted the Best FX Clearing House at the 2018 FX Week Best Banks Awards, launched the first clearing service for deliverable foreign exchange options, in partnership with CLS. The long-awaited options-clearing service has got off to a good start with more than $13 billion of volumes cleared with the participation of nine member firms.

“We expect sizeable pick-up in options clearing [over] the next few months,” says Boyle.

He forecasts that in 12 months’ time all large market participants will be involved in FX options clearing, which could pave the way towards clearing other deliverable derivatives such as forwards.

“I think this part of the market is going through a significant change. I really believe that looking back on this, the market will see FX options clearing as a seismic turning point for FX,” Boyle says.

Next up, LCH will focus on launching a compression service for FX, which users are asking for in a bid to manage their capital and margins more efficiently.

“Daily compression is already available and we are seeing enormous interest from our members,” adds Boyle. “I think this is also going to be a significant development for the industry.”

Interviews with the 2018 FX Week Best Banks Awards winners

JP Morgan

Best Bank Overall for Foreign Exchange Dealing

Best Bank for FX for Banks

Best Bank for FX for Investors

Best Bank for Spot FX

Best Bank for FX Forwards

Best Bank for EUR/USD

Best Bank for USD/JPY

Best Bank for EUR/JPY

Best Bank for E-Trading

Citi

Best Bank for FX for Corporates

Best Bank for Currency Options

Best Bank for Structured Products

Best Bank for FX Prime Brokerage

Best Bank for FX in North America

Best Bank for Emerging European, Middle Eastern and African Currencies

Best Bank for FX Research and Strategy

HSBC

Best Bank for FX in Asia-Pacific

Best Bank for Renminbi

Best Bank for Emerging Asian Currencies

Deutsche Bank

Best Bank for FX in the Eurozone

ANZ

Best Bank for Australian Dollar

Barclays

Best Bank for GBP/USD

Best Bank for EUR/GBP

Best Bank for FX in London

UBS

Best Bank for Swiss Franc

NatWest Markets

Best Bank for FX Post-Trade Services

360T

Best Professional e-Trading Venue

Best Vendor for Dealing Technology

Refinitiv

Best Broker for Forward FX

Best Broker for Emerging Markets FX

LCH

Best FX Clearing House

EBS

Best Broker for Spot FX

Bloomberg

Best Market Data Provider for FX

Danske Bank

Best Bank for Scandinavian Currencies

Standard Bank

Best Bank for South African Rand

Best Bank for African Currencies excluding ZAR

BMO Capital Markets

Best Bank for Canadian Dollar

Banco Santander

Best Bank for Emerging Latin American Currencies

kACE

Best Vendor for Risk Management/Options Pricing Software

Saxo Bank

Best Prime-of-Prime House

BGC (no interview)

Best Broker for Currency Options