CME Group Rolls Out Interest-Rate Swap Clearing Service

CME Group Inc. (CME) on Monday rolled out a new service that will handle over-the-counter derivatives transactions tied to fluctuations in global interest rates.

The CME's interest-rate swap clearing venture has secured participation from U.S. mortgage finance companies Fannie Mae (FNMA) and Freddie Mac (FMCC), as well as 10 major derivatives dealer banks, the exchange operator said in a release Monday.

"By working closely with both the buy- and sell-side, we were able to gain significant input into the needs of the overall marketplace, both in terms of functionality and mitigating systemic risk in creating this cleared-only solution for interest rates swaps," Laurent Paulhac, managing director of over-the-counter products and services for CME, said in a statement.

CME is targeting the interest-rate swap market, estimated at more than $349 trillion in total size, as it broadens a range of clearinghouse functions for derivatives that are traded off-exchange.

Regulators and lawmakers around the world have pushed clearing, which involves traders posting collateral against outstanding transactions, as one means of reducing systemic risk in over-the-counter markets.

Bank participants in the new CME service include Bank of America Merrill Lynch, Barclays Capital, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan, Morgan Stanley, Nomura and UBS.

Alongside Fannie and Freddie, asset management firms BlackRock, Citadel and Pimco will participate in the service, according to CME.

-By Jacob Bunge, Dow Jones Newswires; 312-750-4117; jacob.bunge@dowjones.com

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