BNY Mellon to Close U.S. Derivatives Clearing Business

BNY Mellon will close its swaps clearing business in the U.S.

The business had opened there just three years ago in anticipation of the Dodd-Frank Act requirements mandating the clearing of OTC trades by dealers.

A spokesperson for BNY Mellon said the regulation, which came into force in March this year, has progressed more slowly than anticipated. “The U.S. derivatives clearing business has really not been profitable and has incurred substantial funding charges over the last couple of years and we also don’t see an opportunity to grow the U.S. business profitably in the near term,” he said. “We will also be challenged going forward by the new capital requirements as well and that will impact our ability to achieve profitability.”

BNY Mellon’s European clearing business in Germany will not be impacted “because the business characteristics and market dynamics are different in Germany,” says the spokesperson. “We acquired the derivatives clearing business in Germany as part of the BHF Asset Services acquisition so it’s a core service for asset servicing clients in Germany and its not subject to the same regulatory requirements in the U.S.

In relation to the U.S. business, the spokesperson said BNY Mellon will be organizing and executing an ordinary wind down plan, for clients impacted by this to reduce any potential impact or disruption. The time lines for the closure were not available.

As required under Title VII of the Dodd-Frank Act, BNY Mellon is registered as a swap dealer with the United Stated Commodity Futures Trading Commission (CFTC) and is a member of the National Futures Association, the self-regulatory organization for the U.S. futures and swaps industry.