IntercontinentalExchange Inc. (ICE) plans to begin clearing European credit default swap trades by July through a new entity called ICE Trust Europe, the exchange announced Thursday.

ICE's proposal comes as European regulators call for a euro-zone- based clearing solution for the swaps, which serve as a kind of insurance against corporate defaults and trade in over-the-counter markets.

Atlanta-based ICE welcomed those calls Thursday, saying in a statement that the planned clearinghouse's separate guaranty fund and margin accounts for credit derivatives will help reduce risk in the estimated $30 trillion credit derivatives market.

"It was a recognition that the European marketplace, consisting of dealers, buy-side clients and regulators, desired a European central counterparty," said Sunil Hirani, chief operating officer of ICE's Creditex unit.

In the U.S., ICE is awaiting regulatory approval for ICE US Trust, a credit derivatives clearinghouse developed in conjunction with the bank-backed Clearing Corporation, which ICE is in the process of acquiring.

ICE Trust Europe will function within ICE Clear Europe, the exchange's European clearing facility that launched in November and is regulated by the U.K. Financial Services Authority.

"We're in a unique position, that we have a European central counterparty already that's a recognized clearinghouse, and we've already been working with the FSA and other European regulators to extend the business of our European clearinghouse," Hirani said.

He added that ICE will be able to build on the regulatory work done with the FSA in establishing ICE Clear Europe last year, hastening the process for ICE Trust Europe.

Deutsche Boerse's (DB1.XE) derivatives unit, Eurex, is also looking to clear CDS trades in Europe, with a platform slated to launch by the end of the first quarter. London-based clearing firm LCH.Clearnet last week announced its own plan to develop a swaps clearinghouse by the end of 2009.

NYSE Euronext (NYX) and LCH.Clearnet currently are partnered in the only functioning CDS clearing platform; that partnership will continue as LCH.Clearnet develops its own platform, according to officials.

However, this effort is based in London, a sticking point for some European regulators who want a euro-zone-based solution.

ICE Trust Europe will also be based in London, according to exchange officials, but will seek to provide clearing across all European credit markets.

U.S. regulators also have expressed their preference for a domestic clearing solution for credit derivatives.

Earlier this month, ICE Chief Executive Jeffrey Sprecher aired concerns about an emerging sense of regulatory "nationalization" at play on both sides of the Atlantic.

With regard to credit derivatives clearing, Hirani said the first step is getting U.S. and European clearinghouses up and running; after that, regulatory harmonization may follow.

Some progress was seen on this front Thursday, when the Federal Reserve Bank of New York announced discussions between global regulators, including the FSA and the European Central Bank, centered around cooperating on credit-default-swap clearing.

The primary objectives include mutual support for CDS clearing oversight and applying consistent standards and objectives to the clearing platforms, according to a Fed release.

Earlier Thursday, a group of nine dealer banks voiced their support for the central clearing of credit derivatives in a letter to European Commissioner Charlie McCreevy.

While ICE competes in CDS clearing against Eurex, NYSE Euronext and LCH.Clearnet in Europe, in the U.S. it will go up against a joint venture between CME Group Inc. (CME) and hedge fund Citadel Investment Group, as well as a planned U.S. effort from NYSE Euronext.

Hirani said that despite the increasing number of competitors to clear credit derivative trades, he didn't view it as a crowded field, as other entrants don't possess the credit-specific infrastructure that ICE and Creditex already have in place.

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