LCH.Clearnet SA has received permission to begin clearing credit default swaps (CDS) for US clearing members* through CDSClear, LCH.Clearnet SA's credit default swap clearing business.
This is while LCH.Clearnet SA's application to the US Commodity Futures Trading Commission for registration as a derivatives clearing organization (DCO) is pending. The development adds a third OTC derivative asset class to LCH.Clearnet Group's market leading OTC derivative clearing service for US members, which includes interest rate and foreign exchange derivatives.
The regulatory move allows US members to clear proprietary CDS index trades through LCH.Clearnet SA, the multi-national central counterparty's Paris-based CCP, which provides them with greater choice of institutions through which to clear credit default swap indices and provides additional liquidity to the CDSClear service and the market.
Charlie Longden, CEO of LCH.Clearnet's CDSClear business, said; "We are delighted with the decision to allow us to extend our CDS clearing service to US members as we work towards DCO registration. This development provides more choice and flexibility to members in clearing CDS index trades. We've built upon our extensive OTC expertise and adapted it to provide robust risk and default management for the credit markets."
Ian Axe, LCH.Clearnet Group Chief Executive, said: "This important milestone for our credit default swap clearing business complements LCH.Clearnet Group's market leading position in interest rate swaps and foreign exchange OTC clearing, and enables us to offer clearing services across the broadest range of OTC derivative asset classes and geographies in the market. We look forward to continuing to work with the CFTC and other regulators as we grow our US business."
* US clearing members refers to members defined under Dodd-Frank as "US persons" who can now become direct participants of CDSClear, LCH.Clearnet SA's credit default swap clearing business, following the no-action relief from the CFTC.