The Financial Services Authority has given Chicago-based derivatives exchange operator CME Group the green light to start clearing OTC trades in Europe early next year.
The FSA has approved CME Clearing Europe as a Recognised Clearing House (RCH), enabling it to serve as a central counterparty clearer for over-the-counter derivatives. The venture will initially focus on OTC commodity products, with financial products coming soon after launch.
Barclays and JP Morgan will act as the first settlement banks for and will be a central part of its payment infrastructure. JP Morgan will also provide custody and liquidity services.
The approval provides CME with a chance to tap the regulatory momentum driving OTC clearing, pitting it against market leader IntercontinentalExchange.
Andrew Lamb, CEO, CME Clearing Europe, says: "Receiving RCH status from the FSA means we can now fully focus on the launch of CME Clearing Europe, early in 2011. Through this new London-based subsidiary, we will provide locally-relevant clearing services to meet the needs of our European customers, a key CME Group market."
CME Clearing Europe has also now applied to the CFTC to become a registered derivatives clearing organisation.