CDCC said that the proposed clearing link for the Canadian swap market is to assist in meeting Canada’s G20 commitment of clearing over-the-counter (OTC) derivatives by 31 December 2012.
Upon successful finalization of the agreement, the resulting structure is expected to serve as an important cross-border template for other jurisdictions around the globe that are required to meet similar G20 obligations.
CDCC president and chief clearing officer Glenn Goucher said that the 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 CDCC seek to deliver a viable swaps central counterparty clearing solution for Canada.
The Canadian OTC derivatives market — approximately C$37 trillion in notional value — is principally transacted through Canada’s six banking institutions with a significant number of the counterparties based in the US or other foreign jurisdictions.
The proposed clearing link agreement would enhance the development of an effective clearing solution designed to reduce systemic risk and provide Canadian swap market participants and their trading partners with an optimized solution for clearing.
The agreement would also seek to maximize capital efficiencies while maintaining the highest global standards for risk management.
NYPC CEO Walt Lukken said that NYPC is thrilled to collaborate with CDCC as it explore a clearing link for Canada. This MoU is an important first step in the strategic pursuit to bring OTC swaps into the more capital-efficient structure of NYPC.
