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[ M A R K E T R E V I E W | D E R I V AT I V E S C L E A R I N G ] Scott, head of custody and clearing, Commer- zbank. “The commercial cost of operating in a non-cleared, bilateral environment is becoming increasingly apparent in terms of price and mar- gin requirement. This is leading to increases and an incentive to voluntary clearing activities.” “The US NDF market has set a precedent by voluntary clearing through LCH ForexClear, and we will see the move in Europe to perform more voluntary clearing.” LCH has posted a number of record-breaking achievements in cleared volumes, largely due to massive uptick in voluntary clearing of certain products from the buy-side. SwapClear, LCH’s interest rate derivatives clearing service processed over $873 trillion in notional volumes during 2017, with member and client flow increasing 31% year-on-year. It also saw over $3.1 trillion of inflation swaps cleared, meanwhile compression volumes rose 58% from 2016 to over $608 trillion. “We’ve seen significant growth in volumes across multiple asset classes driven by new customers as well as additional flow from existing customers,” said Daniel Maguire, chief executive of LCH Group in January. LCH’s RepoClear service cleared $175 trillion over the course of the year, a 25% increase on 2016, while EquityClear processed over one billion trades and ForexClear processed more than $11 trillion in notional. The CDSClear ser- vice recorded $1.1 trillion in notional processed “We also see new entrants, with broker-dealer clients who are facilitating trades between a pool of banks and hedge funds.” JAMIE GAVIN, HEAD OF OTC CLEARING EMEA AND APAC, SOCIETE GENERALE PRIME SERVICES 46 // TheTrade // Summer 2018 across its CDS index and single-names offering. “The size of credit lines given for cleared trades rath- er than for bilateral is more favourable due to the credit profile of facing a clearing house, and they [hedge funds] are seeing better pricing in some cases,” says Jamie Gavin, head of OTC clearing EMEA and APAC, Societe Generale Prime Services. “We also see new entrants, with broker-dealer clients who are facilitating trades between a pool of banks and hedge funds. That model previously didn’t work in the bilateral world due to capital reasons, but with clearing and the added benefits you get that is increasing.” Now that mandatory clearing is entrenched in the OTC markets, more and more market participants are moving to a cleared market not because they are required to, but because that is where the liquidity is. Regulations such as EMIR and the uncleared margin rules have made it pricier to do business bilaterally, and instead have shifted focus to the benefits clearing offers. “There has been a mentality shift in clearing derivatives,” says Kieron Smith, deputy head of prime services and financi ng at BNP Paribas. “Previously it was about clearing when it is mandated to do so, now it is to do with liquidity and feasibility to do so. The uncleared margin rules have caused a focus on the operational and simplicity benefits of clearing products.”