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Nyse Liffe shelves CDS clearing

13 August 2009  |  8236 views  |  0 Dead end

Nyse Euronext subsidiary Liffe has suspended its European credit default swaps (CDS) clearing service after failing to attract a single trade since launching in December.

The service, developed with LCH.Clearnet, offered CDS contracts based on the Markit iTraxx European indices with integrated OTC clearing through Liffe's Bclear operation.

However, having failed to attract any trades since launching on 22 December, and in the face of new competition from IntercontinentalExchange (ICE) and Eurex, the service was suspended on 29 July.

A spokesman says the offering has not been delisted and is currently "under review" as the exchange looks at how it can attract business.

At launch, Liffe became the first exchange to offer clearing of CDS contracts and was confident that its service would thrive as regulatory scrutiny of the market built up.

"This important launch delivers one of the highest financial priorities for governments and regulators globally," claimed Nyse Euronext CEO Duncan Niederauer in December.

In February nine of the leading dealer firms in the CDS markets bowed to EU pressure and committed to the use of central counterparty clearing in the European Union by end-July 2009.

However, Liffe has failed to take advantage, losing out to the rival ICE, which successfully entered the fray on 27 July.

In just its second week, ICE cleared 699 transactions totalling EUR31.9 billion in CDS indexes. Another rival, Eurex Credit Clear, has not seen as much business but cleared its first contract on 30 July, days after launching. Meanwhile, a third competitor, CME Group is currently waiting for FSA approval.

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