Friday 10 October 2008
Credit Default Swap Clearing House Inches Forward
A group of leading credit derivative market participants today announced they have joined forces to support a joint global clearing solution for Credit Default Swaps (CDS). Signatories to the letter of intent include The Clearing Corporation, Markit Group, Risk Metrics, and IntercontinentalExchange, Inc. (NYSE:ICE) through its subsidiaries, including ICE US Trust, a New York limited Trust Company (ICE Trust), Creditex and T-Zero. ICE Trust will operate as a New York limited Trust Company and function as global clearinghouse and central counterparty for CDS transactions. ICE Trust plans to become a member of the Federal Reserve System. The letter signals the intention of the signatories to use their best efforts to work together in establishing a clearinghouse that will accomplish the objectives established by the Federal Reserve Bank of New York.
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CME said earlier this week that it is teaming up with Citadel to provide an electronic CDS platform that will be integrated with a central counterparty operating under its existing clearing house. The pair has invited major CDS market participants to join the initiative as founding members by allocating up to 30% of the equity in the venture and by offering certain market maker privileges. CME is the largest financial derivatives exchange in the U.S.
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