LEADING DERIVATIVE DEALERS ANNOUNCE PARTNERSHIP WITH LCH TO USE AND DEVELOP LCH SWAPCLEAR

LONDON, 19 October 2000, -- Eight of the world’s leading derivative dealers, together with The London Clearing House Limited (LCH) today announce their plans to use and develop LCH SwapClear, the clearing service for interest rate derivatives established by LCH.

Bank of America, Barclays, Citibank/ Schroder Salomon Smith Barney, Credit Suisse First Boston, Deutsche Bank, Goldman Sachs, Merrill Lynch and Société Générale (the Group) and LCH have reached an agreement to significantly develop the existing LCH SwapClear service in order to facilitate the clearing, netting and daily margining of an extended range of over-the-counter (OTC) financial products.

The eight institutions have created OTCDerivNet Limited (OTCDerivNet) to provide strategic direction and to finance the further development of the LCH SwapClear service to maximise broad market participation. This expansion will add further currencies, cross-currency swaps, forward rate agreements (FRAs) and interest rate options to the existing service for vanilla swaps.

The core purpose of OTCDerivNet is to ensure the development of a secure, efficient and cost-effective post-trade environment for the mutual benefit of the derivatives industry. It is expected that enhancement of LCH SwapClear will further mitigate operational, credit and settlement risks, while continuing to reduce both support costs and regulatory capital requirements.

The Group will provide the critical mass necessary to facilitate rapid realisation of substantial capital and operational cost savings for all users. It is anticipated that, within three years, the service will be able to process the majority of the global inter-bank volume in these products.

A spokesperson for OTCDerivNet commented: "LCH SwapClear provides a vital link in the drive to facilitate and optimise straight-through-processing and forms an integral part of the industry’s general strategy for growth. We look forward to working closely with LCH and other market participants to encourage rapid development of LCH SwapClear by extending its product range and functionality, ultimately leading to its acceptance as the industry standard for the clearing of interest rate derivatives."

David Hardy, Chief Executive of LCH said: "We are delighted that these leading international financial institutions have recognised the key importance of LCH SwapClear in the OTC derivatives market. We look forward to working with the Group to establish this cornerstone in the further evolution of the market, and to build on the netting, capital and operating cost savings which are delivered by a central counterparty."