NYSE Euronext Focuses On UK Swaps Clearing; No US Timetable
March 11 2009 - 7:03PM
Dow Jones News
NYSE Euronext (NYX) is focusing on its slow-to-develop credit
derivatives clearing platform in London over planned efforts to
launch a similar effort in the U.S., according to a senior
executive.
The joint venture between NYSE Euronext's derivatives arm Liffe
and London-based clearinghouse LCH.Clearnet now counts 32 firms
signed on, but clients are still testing the systems and the
service has yet to see any activity, according to NYSE Liffe's
recently appointed global head of derivatives, Garry Jones.
In an interview with Dow Jones Newswires, Jones acknowledged
"political pressure" among potential users of NYSE Euronext's
BClear-powered credit derivatives clearing service, with many
sell-side participants considering rival efforts to clear trades in
the estimated $27 trillion credit-default swap market.
Jones joined Liffe in 2007 after a career in the banking sector,
working at Bankers Trust, Merrill Lynch and Banque Paribas.
NYSE Euronext is one of five groups looking to clear credit
derivatives in Europe, where dealer banks have voiced support for
such efforts - though some see the banks preferring a bank-backed
solution.
In the U.S., NYSE Euronext was seen as having a regulatory leg
up on CME Group Inc. (CME) and IntercontinentalExchange Inc. (ICE),
both developing U.S.-based CDS clearinghouses, as NYSE Euronext
secured approval from regulators in December.
ICE's effort received the green light Friday and began
operations Monday. CME's platform is operationally ready to launch,
but awaits an exemption from the U.S. Securities and Exchange
Commission.
For the time being, though, NYSE Euronext says it will remain
focused on developing the London business; no time frame for a U.S.
launch is currently in sight, though officials say there has been
progress.
Jones said that in the U.K. a variety of factors have
contributed to the slow progress of the NYSE Euronext CDS clearing
platform, which launched in late December.
Firms signed on to the platform pulled back on technology
efforts in January, further delaying a testing process that
typically takes 12 weeks, Jones said.
Meanwhile, the exchange awaits a settlement process for trades
being developed by the International Swaps and Derivatives
Association, which is expected soon.
Hugh Freedberg, the former head of global derivatives at NYSE
Euronext who was recently appointed chairman of NYSE Liffe, said
that tighter regulation of over-the-counter derivatives was
"inevitable."
But while exchanges can provide greater transparency with regard
to price and participation in OTC products, Jones said that it was
naive for regulators to believe all OTC derivatives can be
cleared.
"That implies that standardization and pricing is available" for
all such products, Jones said, which often isn't the case.
-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117;
jacob.bunge@dowjones.com