LCH Ltd recorded two operational failures in the first quarter, lasting a total of 12 hours and 46 minutes – the longest combined duration of downtime in five years.

At least one of these incidents exceeded the central counterparty’s (CCP) recovery time objective of two hours.

The outages drove LCH’s actual availability over the 12 months to end-March to 99.91%. While this matches the low previously reached in Q1 2021 and last dipped below in 2015, it remains above the target of 99.7%.

The latest figures contrast with an overall decrease in operational failures at other CCPs in Q1. The total duration of incidents over the previous 12 months across 15 other CCPs analysed by Risk Quantum dropped by 35.9% to 18 hours and 50 minutes – the lowest level since Q2 2021. Including LCH Ltd, the aggregate duration increased by 7.5% to 31 hours and 36 minutes.

LCH’s Paris-based division and Eurex were the only other CCPs reporting an increase in failure duration in Q1. LCH SA’s rose from three hours and 16 minutes to four hours and 30 minutes. Eurex’s increased from 33 minutes to 45 minutes.

What is it?

Disclosure standards set by the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions oblige central counterparties to report the number and duration of operational failures affecting core systems over the previous 12 months on a quarterly basis.

Core systems are those that handle the acceptance and novation of trades and the calculation of margin and settlement obligations.

If a CCP is unable to perform these functions, or unable to do so correctly, it is deemed to have suffered a loss of availability. Each CCP has a recovery time objective of two hours to restore availability.

Why it matters

For the most part, the first quarter of 2024 continued the downward trend in failures at major global CCPs since a peak in the first half of 2023. LCH Ltd had been part of this trend, recording no failures for the five quarters prior to Q1.

In this context, the recent failures stand out. At this stage it’s not clear whether the failures impacted any clearing members and if the disruptions caused any rippled effects to the wider financial plumbing.

LCH did not respond to a request for comment in time for publication, leaving the reason for its worst quarter for operational failures in five years unknown.

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