Eurex Clearing has announced that Eurex Credit Clear, its new central counterparty solution for credit default swaps (CDS), will be operational by 27 July and start clearing on 30 July 2009.
Eurex Credit Clear supports the implementation of the industry self-commitment given by nine major market participants to the European Commission to use an EU-based CCP for European CDS products by 31 July 2009.
The initial product scope of Eurex Credit Clear covers a European CDS product suite of the iTraxx benchmark indices and 17 single name iTraxx index constituents from the utility sector. In a next step further European single names will be added to provide full coverage of the iTraxx benchmark index constituents. Eurex Credit Clear is also interlinked with the North American Depository Trust & Clearing Corporation (DTCC) Trade Information Warehouse.
Implementation has been supported by deploying proven application modules from Calypso Technology Inc., a provider of risk solutions for credit derivatives.
On 23 July, the U.S. Securities and Exchange Commission (SEC) approved a conditional exemption that allows Eurex Clearing to operate as a central counterparty for clearing CDS. The new clearing service is also accessible for UK market participants after the regulatory approval by the Financial Services Authority (FSA) on 24 July.
Central counterparty clearing is a stabilizing element for financial markets; based on effective risk management it significantly reduces systemic risk, says Andreas Preuss, CEO of Eurex. Eurex Credit Clear is an important step in offering the benefits of CCP clearing to the OTC derivatives market as part of our overall strategy to expand clearing services for bilaterally traded products.
Eurex Clearing accomplished technical readiness for OTC CDS clearing as planned by the end of the first quarter 2009. Eurex Credit Clear is currently providing production simulation for 20 market participants and is intensively supporting market readiness to enable the industry to meet its self-commitment to the EU Commission.
D.C