Prime broker Newedge plans to develop a central counterparty (CCP) for interest rate swaps (IRS).
Societe Generale and Credit Agricole, parent companies of Newedge, will serve as cleared IRS contingent default managers. The CCP may be accessed by clients of the parent companies.
Newedge says benefits of the CCP will include reduced counterparty risk, default protection and capital efficiencies from cross-margining opportunities.
The development follows the Dodd-Frank stipulation that the $441 trillion IRS market must be shifted from a bilateral OTC model to a centrally cleared model.
Newedge is committed to extending our established listed derivatives clearing services to additional OTC asset classes, beginning with IRS, says Newedge CEO Nicolas Breteau. To fulfill this strategic objective, we are enhancing our multi-asset infrastructure, leveraging the support of our A+ rated shareholders and, working closely with regulators and CCPs. We continue to make a material contribution to shaping what is a dynamic market structure.
The CCP is set to go live in Q2 2012.
(CG)