Monday, December 14, 2009

ICE clearing Europe single-name CDS, adds members

Original posted on Reuters:

Exchange operator IntercontinentalExchange Inc (ICE.N) said on Monday its European unit began clearing single-name credit default swaps (CDS) after receiving British regulatory approval, and it added BNP Paribas (BNPP.PA) and Nomura Holdings (8604.T) as clearinghouse members.

ICE has taken the lead in credit derivative clearing, and said the first tranche of CDS will reference companies in the European utility sector. CDS are used to protect against a borrower defaulting on its debt or to speculate on its quality.

U.S. and European lawmakers and regulators are moving to make the $450 trillion global derivatives markets more transparent by forcing trades to be cleared. They say this would reduce the risks posed by the default of a major swaps dealer, and help avoid a repeat of the financial crisis.

Index-based CDSs have so far been the focus of the move to clearing. [ID:nN09210283]

ICE, which operates the ICE Clear Europe unit, said it has cleared more than $4.3 trillion in notional value of CDS indexes in the United States and Europe so far this year. Rival CME Group Inc (CME.O), also U.S.-based, plans to start clearing CDS this month.

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