WASHINGTON (Dow Jones)-IntercontinentalExchange Inc.'s (ICE) proposal to clear credit-default swap trades passed a major regulatory hurdle Wednesday after the Federal Reserve Board approved the plan.

The Fed's green light will allow ICE to form a limited purpose bank, known as ICE Trust, to serve as a clearinghouse for credit-default swaps.

The approval comes just two days after the Department of Justice's antitrust division approved a portion of its clearing plan by allowing the merger of ICE and The Clearing Corporation.

Both ICE's plan and a clearing proposal by its rival, CME Group Inc. (CME), still need approvals from the Securities and Exchange Commission.

-By Sarah N. Lynch, Dow Jones Newswires; 202-862-6634; sarah.lynch@dowjones.com