Canadian and US clearing firms explore swap link
05 April 2011 | 4907 views | 0
The Canadian Derivatives Clearing Corporation (CDCC) has inked a memorandum of understanding with New York Portfolio Clearing (NYPC) to build a link for the Canadian swap market.
The move is designed to help Canada meet its G20 commitment of clearing over-the-counter (OTC) derivatives by the end of next year.
The C$37 trillion Canadian OTC derivatives market is principally transacted through the country's six largest banking institutions with a significant number of the counterparties based in the US or other foreign jurisdictions.
The proposed clearing link between CDCC and the new, Nyse Euronext-backed, NYPC would "foster the development of an effective clearing solution designed to reduce systemic risk and provide Canadian swap market participants and their trading partners with an optimised solution for clearing," says a statement.
The pair say that if successful, the resulting structure could serve as an important cross-border template for other jurisdictions around the globe that are required to meet similar G20 obligations.
Glenn Goucher, president, CDCC, says: "Today's announcement provides a valuable roadmap for building a clearing solution that best meets the needs of the Canadian OTC derivatives market. NYPC will be a valuable partner as we seek to deliver a viable swaps central counterparty clearing solution for Canada."