LCH.Clearnet Adopts OIS Discounting for US$218 trillion IRS Portfolio

LCH.Clearnet is to begin using the overnight index swap (OIS) rate curves to discount its US$218 trillion IRS portfolio. Previously, in line with market practice, the portfolio was discounted using LIBOR. However, an increasing proportion of trades are now priced using OIS discounting. After extensive consultation with market participants, LCH.Clearnet has decided to move to OIS to ensure the most accurate valuation of its portfolio for risk management purposes. LCH.Clearnet already uses OIS rates to price the rate of return on cash collateral. From 29 June 2010, US dollar, euro and British pound trades in SwapClear will be revalued using OIS.

Roger Liddell, chief executive, LCH.Clearnet, said: “Accurate pricing is essential for prudent risk management. With the market moving increasingly to OIS, it was important for us to consider the implications of this. Our move to OIS discounting demonstrates our commitment to the highest standards of risk management and the sophistication of our SwapClear service.”

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