ICE Begins Clearing Live Credit Derivatives Trades
April 24 2009 - 3:59PM
Dow Jones News
IntercontinentalExchange Inc. (ICE) this week began clearing
live credit default swap transactions, a key step toward mitigating
systemic risk in the $28 trillion market.
The move comes as ICE Trust, the credit derivatives
clearinghouse launched by the Atlanta-based exchange in early
March, crossed the $100 billion threshold in notional value of
trades cleared.
ICE Trust remains the only clearinghouse for credit derivatives
in the U.S. and the only such platform to do any business on either
side of the Atlantic.
Chicago-based CME Group Inc. (CME) is readying its own CDS
clearing and trading solution, a joint venture with the hedge-fund
firm Citadel Investment Group, though no launch date has been
set.
NYSE Euronext (NYX) rolled out its own clearing platform for
credit derivatives in London last December, but, as of this month,
that service had yet to handle any trades.
Up until this week, ICE Trust had been clearing pre-existing
trades, as dealer banks backloaded positions into the
clearinghouse.
Credit default swap indexes remain the only sort of credit
derivatives clearable through ICE Trust, though ICE plans to
eventually expand clearing capabilities to single-name
instruments.
Authorities in the United States and Europe have pushed CDS
dealers to clear credit derivatives trades, in a bid to improve
efficiency and reduce the systemic risks exposed by the
near-collapse of American International Group Inc. (AIG) last
fall.
-By Jacob Bunge, Dow Jones Newswires; 312-750-4117;
jacob.bunge@dowjones.com