SwapClear, the over-the-counter interest rate swap clearing service from LCH.Clearnet, announced in mid-October that it had processed over $1tr of overnight index swaps (OIS) in the 11 week period since it began handling those contracts in July.

The clearing service estimates SwapClear now processes 64% of the global interbank interest rate swap market, after continued growth this year. As of September 30 it had $202tr of outstanding notional trade sides under management.

OIS are fixed/floating interest rate swaps. The floating part is pegged to an index of a daily overnight rate such as the Sterling Overnight Interbank Average (Sonia) or the Euro Overnight Interbank Average (Eonia).

The global financial crisis has reduced swap market participants’ confidence about trading OTC without central clearing.

Many felt the value of a central counterparty was demonstrated in the aftermath of Lehman Brothers’ collapse, when LCH.Clearnet dealt with $9tr of Lehman’s interest rate swap exposure.

SwapClear’s success was a key driver behind the takeover interest in LCH.Clearnet (see page 14).