CME Group has begun clearing credit default swaps (CDS) through CME Clearing. CME Group’s cleared-only CDS initiative, which was jointly developed with its founding members, offers both buy-side and dealer market participants the ability to clear CDS.
The dealer founding members are Barclays Capital, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Morgan Stanley and UBS. The buy-side founding members are AllianceBernstein, BlackRock, BlueMountain Capital Management, Citadel, the DE Shaw Group and PIMCO. In addition, Bank of America Merrill Lynch and Nomura Group are CDS clearing member firms.
CME’s clearing solution provides participants with an open-access clearing solution for over-the counter credit default swaps. It is based upon cleared CDS products that will mirror OTC market conventions and practices, and incorporates the benefits of CME Group’s clearing model.
Laurent Paulhac, MD of OTC products and services at CME Group, said: “Working closely with market participants on both the buy side and sell side we have begun to successfully clear CDS trades. We believe our solution is the most comprehensive credit default swap solution available and brings together a broad range of participants who support our offering.”
Richard Prager, global head of fixed income trading at BlackRock, said: “BlackRock will clear CDS based on the segregation and portability of customer collateral and the operational benefits provided by CME. We are pleased with the progress made with respect to ensuring transparency by leveraging the CME’s proven risk management practices. We are excited that CME has launched its CDS clearing service and look forward to further participation.”
James Hill, MD and global credit derivatives officer at Morgan Stanley, said: “The CDS market continues to make enormous progress with respect to the reduction of operational and systemic risk. Providing clients with access to clearinghouses for CDS transactions is a very important step in this evolution and we are happy to have worked closely with the CME, the dealer community and buy side firms to make this happen.”
