LCH, which is the clearing subsidiary of the London Stock Exchange Group, announced on Wednesday the addition of the Commonwealth Bank of Australia (CBA) as a member, becoming the first Aussie financial institution to join the Paris-based clearinghouse.
“It’s a great milestone to welcome CBA as the first Australian member of LCH SA,” said Corentine Poilvet-Clediere, LCH SA’s Head of RepoClear, Collateral and Liquidity.
As a member of RepoClear, the CBA can access the largest euro-denominated pool of cleared repos. It can also access significant capital and operational efficiencies that include balance sheet netting and intra-day liquidity
Liquidity
Liquidity is at the core of every broker’s offering. It is a basic characteristic of every financial asset – be it a currency, stock, bond, commodity or real estate. The more liquid an asset is, the easier it is to sell and buy on the open market. Foreign exchange is considered to be the most liquid asset class.Brokers can source liquidity from a single or multiple source, thereby delivering to their clients enough market depth for their orders to get filled. The main characteristic of liquidity is its depth, which will determine how quickly and how big of an order can be executed via the trading platform.Understanding LiquidityLiquidity can be internal or external depending on the size and the book of the broker. Companies which are large enough and have material client flows consistently are creating their own liquidity pools from the order flow of their clients, thereby internalizing flows and saving on costs to send customer orders to the interbank market. By doing that however they are exposing themselves to carry the risk on the trade.Liquidity providers can be prime brokers, prime of primes, other brokers or the broker’s book itself. Traditionally brokers are split between internalizing flows and offloading trades of their clients to different liquidity providers.Generally, retail brokers and their clients prefer more liquid assets which lead to better fill rates and less slippage. When there is lack of liquidity on a certain market, slippage can occur – the order is executed at a price which is the closest available to the one requested by the client.
Liquidity is at the core of every broker’s offering. It is a basic characteristic of every financial asset – be it a currency, stock, bond, commodity or real estate. The more liquid an asset is, the easier it is to sell and buy on the open market. Foreign exchange is considered to be the most liquid asset class.Brokers can source liquidity from a single or multiple source, thereby delivering to their clients enough market depth for their orders to get filled. The main characteristic of liquidity is its depth, which will determine how quickly and how big of an order can be executed via the trading platform.Understanding LiquidityLiquidity can be internal or external depending on the size and the book of the broker. Companies which are large enough and have material client flows consistently are creating their own liquidity pools from the order flow of their clients, thereby internalizing flows and saving on costs to send customer orders to the interbank market. By doing that however they are exposing themselves to carry the risk on the trade.Liquidity providers can be prime brokers, prime of primes, other brokers or the broker’s book itself. Traditionally brokers are split between internalizing flows and offloading trades of their clients to different liquidity providers.Generally, retail brokers and their clients prefer more liquid assets which lead to better fill rates and less slippage. When there is lack of liquidity on a certain market, slippage can occur – the order is executed at a price which is the closest available to the one requested by the client.
Read this Term management.
RepoClear offers access to 13 markets. The clearinghouse
Clearing House
A clearing house is defined as an intermediary between two parties, a buyer and seller, which helps facilitate the overall process from trade inception to settlement. Clearing houses streamline the exchange of payments, securities, or derivatives transactions.The clearing house is situated between two clearing firms who also helps reduce the risk of either member firm failing to honor their respective trade settlement obligations.Buyers and sellers enter into legally binding agreements for the execution of trades. Consequently, as a third party, the role of the clearing house is to centralize and standardize all of the steps leading up to the settlement of any transaction. Clearing houses are integral in helping reduce the cost, settlement or operational risk of clearing as well as settling multiple transactions across multiple entities.Role of Clearing Houses Across ExchangesFinancial exchanges such as commodities and stock exchanges have relied on clearing houses for over a century. Today, the futures market is often associated with a clearing house, as its financial products are leveraged and necessitate a stable intermediary. Every reputable exchange possesses its own clearing house. This requires all members of an exchange to effectively clear their trades via a clearing house at the terminus of each trading session.Additionally, exchange members are obligated to reconcile clearing house’s margin requirements, sufficient to cover the member’s debit balance.This is a crucial stopgap to help prevent risk to individual traders. For example, if a trader doesn’t meet a margin call, any and all trades will be closed. This is to prevent against any additional losses. This process helps reduce the risk to individual traders, ensuring sufficient funds in the account to cover any losses which may occur.
A clearing house is defined as an intermediary between two parties, a buyer and seller, which helps facilitate the overall process from trade inception to settlement. Clearing houses streamline the exchange of payments, securities, or derivatives transactions.The clearing house is situated between two clearing firms who also helps reduce the risk of either member firm failing to honor their respective trade settlement obligations.Buyers and sellers enter into legally binding agreements for the execution of trades. Consequently, as a third party, the role of the clearing house is to centralize and standardize all of the steps leading up to the settlement of any transaction. Clearing houses are integral in helping reduce the cost, settlement or operational risk of clearing as well as settling multiple transactions across multiple entities.Role of Clearing Houses Across ExchangesFinancial exchanges such as commodities and stock exchanges have relied on clearing houses for over a century. Today, the futures market is often associated with a clearing house, as its financial products are leveraged and necessitate a stable intermediary. Every reputable exchange possesses its own clearing house. This requires all members of an exchange to effectively clear their trades via a clearing house at the terminus of each trading session.Additionally, exchange members are obligated to reconcile clearing house’s margin requirements, sufficient to cover the member’s debit balance.This is a crucial stopgap to help prevent risk to individual traders. For example, if a trader doesn’t meet a margin call, any and all trades will be closed. This is to prevent against any additional losses. This process helps reduce the risk to individual traders, ensuring sufficient funds in the account to cover any losses which may occur.
Read this Term also highlighted the onboarding of the Aussie banks showing the growing demand for the RepoClear service outside Europe. The CBA has become the 97th member of the clearinghouse.
“RepoClear SA has been gaining increasing traction in regions outside Europe, with members joining from Japan, Canada, and now Australia. Banks such as CBA play a key role in further deepening and enriching our netting pool. We are looking forward to working in collaboration with CBA, providing a best-in-class clearing service,” Poilvet-Clediere added.
Increasing RepoClear’s Demand
RepoClear SA has witnessed significant growth in its volume and membership in recent years. In 2021, it recorded €195 trillion of nominal cleared across 9.4 million trades, representing a 15 percent and 29 percent increase, respectively.
Meanwhile, RepoClear is merging its €GC and RepoClear SA offering into one single liquidity pool with cross netting, but that is still pending regulatory approval.
Commenting on becoming the first Aussie member of RepoClear, CBA’s Executive General Manager of Global Markets, Chris McLachlan, said: “The service’s 13 euro-denominated debt markets and recent expanded access for the buy-side, offers vital access to secured funding markets for CBA and its clients, as well as offering significant opportunities for capital and operational efficiencies.”
LCH, which is the clearing subsidiary of the London Stock Exchange Group, announced on Wednesday the addition of the Commonwealth Bank of Australia (CBA) as a member, becoming the first Aussie financial institution to join the Paris-based clearinghouse.
“It’s a great milestone to welcome CBA as the first Australian member of LCH SA,” said Corentine Poilvet-Clediere, LCH SA’s Head of RepoClear, Collateral and Liquidity.
As a member of RepoClear, the CBA can access the largest euro-denominated pool of cleared repos. It can also access significant capital and operational efficiencies that include balance sheet netting and intra-day liquidity
Liquidity
Liquidity is at the core of every broker’s offering. It is a basic characteristic of every financial asset – be it a currency, stock, bond, commodity or real estate. The more liquid an asset is, the easier it is to sell and buy on the open market. Foreign exchange is considered to be the most liquid asset class.Brokers can source liquidity from a single or multiple source, thereby delivering to their clients enough market depth for their orders to get filled. The main characteristic of liquidity is its depth, which will determine how quickly and how big of an order can be executed via the trading platform.Understanding LiquidityLiquidity can be internal or external depending on the size and the book of the broker. Companies which are large enough and have material client flows consistently are creating their own liquidity pools from the order flow of their clients, thereby internalizing flows and saving on costs to send customer orders to the interbank market. By doing that however they are exposing themselves to carry the risk on the trade.Liquidity providers can be prime brokers, prime of primes, other brokers or the broker’s book itself. Traditionally brokers are split between internalizing flows and offloading trades of their clients to different liquidity providers.Generally, retail brokers and their clients prefer more liquid assets which lead to better fill rates and less slippage. When there is lack of liquidity on a certain market, slippage can occur – the order is executed at a price which is the closest available to the one requested by the client.
Liquidity is at the core of every broker’s offering. It is a basic characteristic of every financial asset – be it a currency, stock, bond, commodity or real estate. The more liquid an asset is, the easier it is to sell and buy on the open market. Foreign exchange is considered to be the most liquid asset class.Brokers can source liquidity from a single or multiple source, thereby delivering to their clients enough market depth for their orders to get filled. The main characteristic of liquidity is its depth, which will determine how quickly and how big of an order can be executed via the trading platform.Understanding LiquidityLiquidity can be internal or external depending on the size and the book of the broker. Companies which are large enough and have material client flows consistently are creating their own liquidity pools from the order flow of their clients, thereby internalizing flows and saving on costs to send customer orders to the interbank market. By doing that however they are exposing themselves to carry the risk on the trade.Liquidity providers can be prime brokers, prime of primes, other brokers or the broker’s book itself. Traditionally brokers are split between internalizing flows and offloading trades of their clients to different liquidity providers.Generally, retail brokers and their clients prefer more liquid assets which lead to better fill rates and less slippage. When there is lack of liquidity on a certain market, slippage can occur – the order is executed at a price which is the closest available to the one requested by the client.
Read this Term management.
RepoClear offers access to 13 markets. The clearinghouse
Clearing House
A clearing house is defined as an intermediary between two parties, a buyer and seller, which helps facilitate the overall process from trade inception to settlement. Clearing houses streamline the exchange of payments, securities, or derivatives transactions.The clearing house is situated between two clearing firms who also helps reduce the risk of either member firm failing to honor their respective trade settlement obligations.Buyers and sellers enter into legally binding agreements for the execution of trades. Consequently, as a third party, the role of the clearing house is to centralize and standardize all of the steps leading up to the settlement of any transaction. Clearing houses are integral in helping reduce the cost, settlement or operational risk of clearing as well as settling multiple transactions across multiple entities.Role of Clearing Houses Across ExchangesFinancial exchanges such as commodities and stock exchanges have relied on clearing houses for over a century. Today, the futures market is often associated with a clearing house, as its financial products are leveraged and necessitate a stable intermediary. Every reputable exchange possesses its own clearing house. This requires all members of an exchange to effectively clear their trades via a clearing house at the terminus of each trading session.Additionally, exchange members are obligated to reconcile clearing house’s margin requirements, sufficient to cover the member’s debit balance.This is a crucial stopgap to help prevent risk to individual traders. For example, if a trader doesn’t meet a margin call, any and all trades will be closed. This is to prevent against any additional losses. This process helps reduce the risk to individual traders, ensuring sufficient funds in the account to cover any losses which may occur.
A clearing house is defined as an intermediary between two parties, a buyer and seller, which helps facilitate the overall process from trade inception to settlement. Clearing houses streamline the exchange of payments, securities, or derivatives transactions.The clearing house is situated between two clearing firms who also helps reduce the risk of either member firm failing to honor their respective trade settlement obligations.Buyers and sellers enter into legally binding agreements for the execution of trades. Consequently, as a third party, the role of the clearing house is to centralize and standardize all of the steps leading up to the settlement of any transaction. Clearing houses are integral in helping reduce the cost, settlement or operational risk of clearing as well as settling multiple transactions across multiple entities.Role of Clearing Houses Across ExchangesFinancial exchanges such as commodities and stock exchanges have relied on clearing houses for over a century. Today, the futures market is often associated with a clearing house, as its financial products are leveraged and necessitate a stable intermediary. Every reputable exchange possesses its own clearing house. This requires all members of an exchange to effectively clear their trades via a clearing house at the terminus of each trading session.Additionally, exchange members are obligated to reconcile clearing house’s margin requirements, sufficient to cover the member’s debit balance.This is a crucial stopgap to help prevent risk to individual traders. For example, if a trader doesn’t meet a margin call, any and all trades will be closed. This is to prevent against any additional losses. This process helps reduce the risk to individual traders, ensuring sufficient funds in the account to cover any losses which may occur.
Read this Term also highlighted the onboarding of the Aussie banks showing the growing demand for the RepoClear service outside Europe. The CBA has become the 97th member of the clearinghouse.
“RepoClear SA has been gaining increasing traction in regions outside Europe, with members joining from Japan, Canada, and now Australia. Banks such as CBA play a key role in further deepening and enriching our netting pool. We are looking forward to working in collaboration with CBA, providing a best-in-class clearing service,” Poilvet-Clediere added.
Increasing RepoClear’s Demand
RepoClear SA has witnessed significant growth in its volume and membership in recent years. In 2021, it recorded €195 trillion of nominal cleared across 9.4 million trades, representing a 15 percent and 29 percent increase, respectively.
Meanwhile, RepoClear is merging its €GC and RepoClear SA offering into one single liquidity pool with cross netting, but that is still pending regulatory approval.
Commenting on becoming the first Aussie member of RepoClear, CBA’s Executive General Manager of Global Markets, Chris McLachlan, said: “The service’s 13 euro-denominated debt markets and recent expanded access for the buy-side, offers vital access to secured funding markets for CBA and its clients, as well as offering significant opportunities for capital and operational efficiencies.”
Source: https://www.financemagnates.com/institutional-forex/lch-adds-commonwealth-bank-of-australia-as-repoclears-first-aussie-member/