IntercontinentalExchange (ICE) has developed a solution that provides segregation of customer funds and positions in credit default swap (CDS) clearing. ICE has claimed that the buy-side solution offers a roadmap for the industry’s transition to clearing based on participants’ specific risk management needs, allowing firms to retain trading relationships and a range of competitive execution models.
The solution’s expanded legal framework protects customer positions and collateral in the event that a clearing member defaults on its obligations to the clearing house. These customer protections, together with ICE’s rigorous CDS risk model, offer increased security for buy-side market participants. Reportedly, the solution also addresses systemic risk by supporting both new trades and the existing backlog of outstanding OTC CDS contracts at the DTCC Trade Information Warehouse (TIW).
Jeffrey Sprecher, chairman and CEO of ICE, said: We recognize the important role that a central counterparty plays in addressing systemic risk for all market participants. Our segregated funds solution has been designed to provide robust protections for buy-side firms and to ensure our CDS clearing offering serves the needs of the entire CDS market.
The solution, which will enable buy-side participation in CDS clearing, is expected to be introduced in October 2009, subject to regulatory approval. Over the coming weeks, ICE will continue to consult with regulators and actively test connectivity with buy-side firms in preparation for the October introduction.
Atlanta-based ICE operates regulated exchanges, trading platforms and clearing houses serving the global markets for agricultural, credit, currency, emissions, energy and equity index markets.
