The IntercontinentalExchange has announced that ICE Clear Europe has introduced clearing for European credit default swaps (CDS), beginning with iTraxx contracts, effective this week.
ICE Clear Europe, which also provides clearing services for ICE’s futures and OTC energy markets, has established a separate risk pool for clearing CDS, including guaranty fund and margin accounts.
In June 2009, ICE Trust U.S. surpassed USD1 trillion CDS cleared, with a weekly record of USD247 billion cleared.
Said Paul Swann, President of ICE Clear Europe: “The launch of CDS clearing today in Europe is an important milestone in the move to increased transparency, standardization and security in the over the counter markets. We have developed a sound risk model that recognises the unique requirements of clearing European CDS instruments. By separating the risk pool from our energy markets and employing a bespoke CDS margining system, we are taking the steps necessary to offer the transparency and security provided by clearing, while containing risk exposure within the CDS markets.”
Initial CDS clearing members at ICE Clear Europe include: Bank of America, Barclays, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Morgan Stanley and UBS.
Each clearing member has made a contribution to establish the European CDS guaranty fund. In addition to member contributions, ICE has contributed USD10 million toward the ICE Clear Europe CDS guaranty fund, in addition to its USD10 million contribution to the ICE Trust guaranty fund to date. ICE remains committed to a guaranty fund contribution of USD100 million over a two-year period, which will be split evenly between its U.S. and European CDS clearing houses.
ICE also announced that Suzanne Hubble has joined ICE Clear Europe as Director, CDS Development. Hubble is responsible for the strategic development of ICE Clear Europe’s European CDS clearing business. Prior to joining ICE, Hubble spent over 10 years at J.P. Morgan where she was most recently responsible for e-Commerce and Strategic Initiatives for the European Credit Trading business.