ICE Clear Europe has launched clearing services for single-name credit default swap (CDS) contracts after receiving regulatory approval in the U.K.
BNP Paribas and Nomura have been approved as CDS clearing members and are actively clearing as of this week. ICE Clear Europe now has 13 CDS clearing members.
The announcement comes days after the U.S. House of Representatives has amended the financial regulation bill to stop firms – mainly banks – from holding over 20% in over-the-counter derivatives clearing houses. Two of the biggest clearing houses in the world, ICE and CME Group, are not controlled by banks.
The first tranche of single name CDS references companies in the European utility sector.
Said Paul Swann, President of ICE Clear Europe: “We are pleased to announce the successful launch of single name clearing on behalf of our clearing participants. This capability complements numerous industry initiatives underway to restructure the market and enables the reduction of counterparty credit risk. Together these steps promote the recovery of the CDS markets and the global lending markets.”
Single-name CDS instruments reference individual corporate or sovereign government debt instruments.
Globally, ICE has cleared over $4.3 trillion in notional value of CDS indexes and has aggregate open interest of $343 billion. ICE Clear Europe’s CDS clearing commenced in July 2009 with European index (iTraxx) contracts, and has cleared more than 800 billion euro in notional.