SwapClear is able to receive matched trades via Swap Execution Facilities ( SEF) or Derivatives Contract Markets (DCM). These execution venues may connect to SwapClear via a middleware provider, such as MarkitWire or SwapClear’s proprietary direct connectivity platform, ClearLink. Outlined below is a list of the venues currently onboarded to SwapClear and their connectivity mode.
Unless otherwise noted, each of the below venues is connected to both LCH LLC and LTD.
The example below shows the client and executing broker clearing through an FCM (this is known as double-give-up).
Trade Execution/Affirmation & Allocation – CP 1 and CP 2 agree to a transaction on the Execution Venue/affirmation platform:
If executed with a venue that is directly connected to LCH –A matched trade is submitted to LCH by the Execution Venue.
If Voice Executed/Bilaterally - CP 1 submits trade details to CP2 for Affirmation. CP 2 (if required) affirms trade details, enhances with allocations ( if required) and can also nominate an FCM or SCM.
Eligibility Check – Once the matched and allocated trade is received, an eligibility check is performed (Product / Participant/Fee Settlement)
If the trade passes eligibility checks, SwapClear message reads “Awaiting Acceptance” If the trade fails, SwapClear message reads “Rejected Eligibility” with the reason for rejection.
FCM or SCM Risk Assessment – If the trade passes eligibility checks, trade and allocation details are sent to each FCM or SCM for acceptance.
If both trade sides are cleared by the same FCM or SCM, an acceptance message from each side is required.
Status messages are sent to Execution Venue/affirmation platform clients; acceptances are FCM or SCM specific.
*Trade Registration – After FCM or SCM acceptance, trades are registered in SwapClear (assuming sufficient collateral has been posted). Post-registration, all participants are notified.
On-SEF transactions shall be pre-credit checked by the CB and as such are auto processed with no CB acceptance message required.