LCH adds eight forwards to FX clearing service

LCH has expanded its nascent foreign exchange clearing service to include forwards, marking another milestone for the London-based firm as it looks to build an FX clearing business.

LCH, owned by the LSE Group, said on Wednesday it has included in its ForexClear service FX forwards based on eight of the most-traded currency pairs.

The clearing house said the extension marks a “significant expansion of the universe of FX derivatives available for clearing” and represents the first physical FX settlement service for cleared FX products, developed in collaboration with FX settlement firm CLS.

The eight currency pairs are: AUD/USD, EUR/USD, GBP/USD, USD/JPY, USD/CHF, EUR/JPY, EUR/CHF and EUR/GBP.

The inclusion of forwards followed the launch of deliverable FX options clearing in 2018 which represented a major breakthrough for the service which went live in 2012 clearing non-deliverable forwards.

Paddy Boyle, head of ForexClear, LCH, said in a statement: “Making FX Forwards available for clearing is a significant moment for the market. This initiative substantially broadens the proportion of the FX market which is able to be cleared. As a result, we’re pleased to be bringing the risk management and efficiency benefits of clearing to an even larger segment of the market.”

Tom Prickett, co-head of EMEA Rates, J.P. Morgan, added: “The launch of cleared FX Forwards unlocks more opportunities for improved risk management and operational efficiencies. It’s always beneficial for the dealer community to have choice and today’s announcement is an exciting step for the advancement of the FX forward market.”

LCH said the launch of the eight FX forwards was agreed following consultation with ForexClear clients, which include some of the world’s largest FX trading banks.

Tamaryn Nuttall, COO, ForexClear, LCH, told Global Investor: “We expect the major global FX players to begin using the service first, and anticipate more regional banks to take up clearing once activity in the cleared product is established.”