Wednesday, June 23, 2010

NASDAQ OMX expands clearing offering to include Interest Rate Swaps

NASDAQ OMX (NASDAQ:NDAQ) announces the launch of a pilot project together with SEB and the Swedish National Debt Office (Riksgälden) through which it will offer central counterparty clearing (CCP) of Interest Rate Swaps (IRS). NASDAQ OMX has also initiated a strategic dialogue with all major swap dealers in Sweden, with the aim to build a full scale clearinghouse for IRS in Swedish kronor (SEK).

Previously, SEK denominated IRS, a market with an average daily turnover of 30 billion SEK, have been collateralized and settled bilaterally. The first transactions were successfully registered for clearing yesterday.

Interest Rate Swaps are typically traded over-the-counter (OTC) with limited pre- and post-trade transparency. As the major derivative instrument traded OTC globally, the aggregated outstanding notional amount was 349 trillion USD at year-end 2009. Interest Rate Swaps have since the financial turmoil in 2008 been subject to proposals by legislators both in the U.S. and Europe to introduce mandatory CCP clearing and to increase pre- and post trade
transparency. Swap dealers may therefore soon be obliged to clear IRS through a CCP, a service that is now available by NASDAQ OMX for SEK-denominated swaps.

“Through the IRS central counterparty clearing offering, NASDAQ OMX is building a Nordic clearing house that covers all Fixed Income instruments,” says Erik Thedéen, Head of Nordic Fixed Income and President NASDAQ OMX Stockholm. “This service will reduce the administrative burden and, more importantly, bring with it a reduction of counterparty risk for market participants and thereby improve financial stability. The ability to net multiple post-trade transactions through a central counterparty also allows our market participants to reduce collateral significantly.”

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