LCHClearnet launches gilt repo product

LCHClearnet launches gilt repo product

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LCHClearnet the has launched Term £GC to enhance the central clearing of gilt general collateral (GC) repo trades.

Developed as a joint initiative with Euroclear UK and Ireland (EUI), the London Money Market Association (LMMA) and gilt repo market participants with support from the Bank of England, the launch of Term £GC is an important milestone for the gilt repo market and will reduce the current operational and liquidity risk in managing gilt GC repo transactions. 

“We have worked closely with the gilt repo market to ensure that the design of Term £GC delivers the essential benefits of reduced operational risk and an improvement in how Sterling settlement liquidity is managed. We would like to thank gilt repo market participants and industry stakeholders who have worked with us to design, test and implement the Term £GC product and for their support in delivering this product to the market," said John Burke, executive director, fixed income at LCHClearnet.

Term £GC incorporates an innovative dual netting feature designed to optimise netting opportunities for LCHClearnet’s members and utilises an enhanced delivery by value settlement mechanism at EUI that eliminates the requirement for daily return of cash and collateral for term trades.

Trades in Term £GC will be executed on the leading repo automated trading systems and via voice brokers.

Building on the introduction in April of RepoIQ, the VaR-based margin methodology for the Fixed Income service, LCH.Clearnet also supports a margin offset for Term £GC against trades in specific-ISIN UK Gilts, thus reducing the cost of clearing for banks active in the gilt repo market. 
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