On Monday, CME Clearing Europe, CME Group?s European clearing house, announced it received FSA approval and subsequently launched its real-time, open access clearing of Interest Rate Swaps (IRS). This move represents CME Clearing Europe?s first step in expanding into clearing over-the-counter (OTC) financial derivatives while expanding its accomplishments in clearing?OTC IRS in the?US and CME Clearing Europe?s current energy and commodity businesses.
With CME’s entry, three may be a crowd as it takes the competition up a notch against the ?Eurex unit of Deutsche Boerse AG and the LCH.Clearnet.
From the initial OTC IRS European launch, it will encompass seven currencies: GBP, EUR, CAD, AUD, CHF, JPY and USD with maturities of up to 50 years for USD, EUR, GBP and for others, 30 years. The systems and processes for clearing IRS have been developed in collaboration with swap dealers, clearing firms and buy-side participants such as BNP Paribas, Credit Suisse, Goldman Sachs International, HSBC,?J.P. Morgan Securities Plc, Nomura International Plc and The Royal Bank of Scotland. ?Look for Citibank, Morgan Stanley and UBS to also join in over the next few weeks.?
First up to use the new clearing system was the UK-based asset manager Aviva Investors.?
Shahid Ikram, Chief Investment Officer at Aviva Investors said via Automated Trader,?”This first cleared OTC trade with CME Clearing Europe represents a significant step towards our goal of developing the clearing infrastructure to enable the ongoing use of OTC derivatives at Aviva Investors in accordance with the G20 mandate.”
Since May 2011,?CME Clearing Europe unit has been focused on commodity contracts but look for some upcoming product expansion.?
Chief Executive Officer Andrew Lamb of CME Clearing Europe said of the move, ?Our overall aim is to provide a single, integrated platform offering operational flexibility across over-the-counter IRS, FX, CDS and commodities for our European clients. The expansion into IRS clearing deepens our offering, providing access to financial derivative clearing through our European platform, accommodating a broad base of international customers. We will be looking to expand this further with the launch of OTC FX and CDS later this year, and the provision of clearing services for?CME Europe?which, pending regulatory approval, will launch in the second quarter.?