US DOJ Reviewing ICE's Credit Derivatives Clearing Plan
January 13 2009 - 2:17PM
Dow Jones News
Officials at the IntercontinentalExchange Inc. (ICE) confirmed
this week that the antitrust division of the U.S. Department of
Justice is also examining part of its business plan for clearing
credit-default swaps, adding to pending approvals from other
federal regulators.
Specifically, the DOJ is probing ICE's pending acquisition of
the Clearing Corp., an independent clearinghouse owned by large
derivatives dealers. ICE first submitted details of the acquisition
to the DOJ about three months ago. Under federal law, acquisitions
of a certain size must receive approval from federal antitrust
regulators. A spokeswoman for the DOJ refused to provide details,
except to say the department is "aware" of the ICE's pending
acquisition, but ICE officials noted that the DOJ's probe is a
routine review.
"A review would apply in most M&A situations," said Sarah
Stashak, an ICE spokeswoman, noting that the DOJ review would still
apply even if the acquisition wasn't tied to the credit-default
swap clearing plan.
Still, the need for DOJ approval of the Clearing Corp.
acquisition represents another hurdle that ICE must overcome as it
seeks to clear trades in the $32 trillion credit-default swap
market.
The exchange has been unable to start clearing credit-default
swaps because it is still awaiting approvals from the New York
Federal Reserve and the Securities and Exchange Commission. Under
ICE's plan, it intends to form a limited purpose bank called ICE US
Trust, which would make it subject to Fed oversight.
Two rival companies, meanwhile, are also looking to offer
credit-default swap clearing platforms in the U.S., but under
different primary regulators. Those include proposals by CME Group
Inc. (CME) and a joint effort between NYSE Euronext (NYX) and
LCH.Clearnet.
Federal regulators pledged in November to grant approvals to one
or more of the three U.S.-based credit-default swap clearing
proposals before Dec. 31, but so far, only LCH.Clearnet has
received a green light.
ICE officials said the exchange expects approval on both its
acquisition of Clearing Corp. and its planned credit-default swap
clearinghouse in a matter of weeks.
Part of the delay, ICE said, is that its original clearing plan
submitted to the Fed didn't incorporate the Clearing Corp. deal,
which had yet to be announced. That acquisition, however, will
allow the company to offer a global clearing solution for credit
derivatives, even though it has also made the federal approval
process a tad more complex.
-By Sarah N. Lynch and Jacob Bunge, Dow Jones Newswires;
202-862-6634; sarah.lynch@dowjones.com.
Click here to go to Dow Jones NewsPlus, a web front
page of today's most important business and market news, analysis
and commentary. You can use this link on the day this article is
published and the following day.