SIENA, Italy & NEW YORK & LONDON, Thursday, September 9th 2010 [ME NewsWire]:
- Transaction Represents First Major Client to Move to Full Scale Clearing -
- Backloading of $200 Billion Total Notional Value of OTC Interest Rate Swaps Already Underway -
(BUSINESS WIRE)-- MPS Capital Services (MPS), a wholly owned subsidiary of Banca Monte dei Paschi di Siena S.p.A., Barclays Capital, the investment banking business of Barclays Bank plc, and LCH.Clearnet Ltd (LCH.Clearnet) today announced that MPS has signed an agreement to clear interest rate swaps on LCH.Clearnet’s SwapClear service through Barclays Capital. The transaction represents the first major client clearing mandate for backloaded trades.
Barclays Capital is the primary clearing broker for MPS’s interest rate swap transactions under an agreement that includes the backloading of a significant portion of MPS’s historical interest rate swap transactions, a first for client clearing.
The total notional value of interest rate swaps to be backloaded is in excess of $200 billion, with a material portion of that backloading already undertaken, including dollar, sterling and euro swaps with multiple counterparties.
“This agreement is an important step for MPS in developing a leadership position in OTC Derivatives. MPS is fully supportive of the expected EU regulatory reform towards central clearing,” said Matteo Bertotti, Head of Fixed Income Derivatives at MPS Capital Services. “Barclays Capital has displayed a clear commitment, leadership and readiness to adapt to these new market developments. MPS was pleased to extend its long history of working with Barclays Capital through this transaction.”
By backloading and clearing future interest rate swap transactions, MPS will benefit from reduced counterparty risk, potential capital relief, a more efficient collateral management process and lower overall operational risks.
“This is a clear milestone in the work to take the clearing of OTC interest rate swap transactions beyond the dealer-to-dealer level. OTC clearing represents a significant technology challenge for the industry and we are proud to be able to extend our leading position in clearing by being the first broker dealer to backload a substantial portfolio,” said Ajay Nagpal, Head of Prime Services at Barclays Capital.
Harry Harrison, head of Rates Trading at Barclays Capital, added, “Central clearing will play a critical role in the development of the rates market - and other asset classes - by reducing counterparty risk, enhancing liquidity and bringing greater transparency and efficiency. From our position as one of the leading interest rates platforms in the industry, we see a tremendous opportunity to introduce the benefits of central clearing to our clients and hope that this transaction with MPS will be the first of many.”
Michael Davie, CEO of the SwapClear service at LCH.Clearnet said, “We congratulate our partners MPS and Barclays Capital for this landmark transaction. This is an important step for the OTC market and the buy-side community as a whole and reflects the prevailing impetus to reduce systemic risk through central clearing. In choosing SwapClear to clear their trades and legacy portfolio, MPS will benefit from the proven experience, robustness and scope of the service. Our goal is to continue to work with clients and clearing members alike to reduce risk, reduce costs and improve market transparency.”
Barclays Capital’s OTC Derivatives Clearing business is a multi-asset class offering and part of the firm’s Prime Services business. A dedicated team of professionals across the globe provides clients with support for all OTC derivatives clearing related requirements, in coordination with Barclays Capital’s leading credit, interest rates, foreign exchange, equities and commodities businesses. In December 2009, Barclays Capital was the first broker to clear client credit default swaps (CDS) and interest rate derivatives. Global Custodian recognized this leadership by awarding the firm 106 ‘Best in Class’ awards in their 2010 OTC Derivatives Prime Brokerage Survey. Through BARX, Barclays Capital’s online trading platform, clients can benefit from straight-through processing, clearing and reporting of OTC transactions.
About MPS Capital Services
MPS Capital Services is the Investment Bank of Banca Monte dei Paschi Spa, the third Italian Banking Group, created in 2007 through the integration of MPS Finance, the high reputated Investment Bank, and MPS Banca per l’Impresa, the Bank for project finance, corporate finance and special lending.
About Banca Monte dei Paschi di Siena
Banca Monte dei Paschi di Siena, founded in 1472 is considered to be the oldest bank in the world. Today’s parent company of Italy’s third largest banking group, the bank holds significant market shares in all areas of business.
The Montepaschi Group is present all over Italy and in the major international financial centres, with operations ranging from traditional banking activities to Private Banking (mutual funds, wealth management, pension funds, and life insurance policies) and Corporate Banking (project finance, merchant banking, and financial advisory), with a special vocation for household accounts and small and medium enterprises. With some 33,000 employees and over 3,000 branches, the Montepaschi Group offers its services to more than six million customers.
About Barclays Capital
Barclays Capital is the investment banking division of Barclays Bank PLC. With a distinctive business model, Barclays Capital provides large corporate, government and institutional clients with a full spectrum of solutions to their strategic advisory, financing and risk management needs. Barclays Capital has offices around the world, employs over 25,000 people and has the global reach, advisory services and distribution power to meet the needs of issuers and investors worldwide. For further information about Barclays Capital, please visit our website www.barclayscapital.com.
About SwapClear
LCH.Clearnet’s SwapClear service is the global leader for over the counter (OTC) Interest Rate Swaps clearing. It currently clears more than 40% of the interest rate swap market, representing trades with a total notional principal of $229 trillion*.
Launched in 1999 by LCH.Clearnet, SwapClear now clears swaps in 14 currencies; USD, EUR and GBP out to 50 years, AUD, CHF, SEK and JPY out to 30 years and the remaining 6 currencies out to 10 years. It also clears OIS out to 2 years in USD, EUR, GBP and CHF.
In December 2009, responding to market demand, SwapClear extended its No. 1 clearing service to the buy-side.
*As of end of June 2010
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