Clearing in partnership with LCH
NLX products are cleared through LCH, allowing participants to portfolio margin short-term and long-term interest rate contracts in a single clearing house.
This unique approach offers participants significant initial margin savings and collateral efficiencies, compared to the traditional market structure of clearing both ends of the curve in two separate vertical silo clearing houses.
Products traded on NLX will benefit from an innovative VaR methodology for margin calculations, along with the PAIRs approach for clearing at LCH. This replaces the 25-year-old SPAN and TIMS methodology, currently used by legacy platforms, and offers a more efficient system of margin calculation and robust approach to risk for diversified portfolios.
The use of VaR margining for NLX products creates a single, consistent risk management methodology across NLX products and a range of OTC derivatives cleared and settled at LCH. This approach creates the potential to easily extend portfolio margining across LCH in the future.