International Derivatives Clearing Group, LLC (IDCG), a majority owned, independently operated, subsidiary of The NASDAQ OMX Group, Inc.(sm), officially launches its clearinghouse. IDCG began accepting US Dollar denominated Interest Rate Swap (IRS) Futures contracts for clearing and settlement on 29 December 2008. These IRS Futures contracts have been cleared by IDCG’s wholly owned, Commodity Futures Trading Commission (CFTC) regulated clearinghouse, International Derivatives Clearinghouse (IDCH). IDCH was granted a derivatives clearing organization license (DCO) by the CFTC on 22 December 2008.
“By completing its first trade in 2008, IDCG has become the clear leader in delivering central counterparty clearing to the massive Over-the-Counter derivatives market, says Bob Greifeld, CEO of NASDAQ OMX. IDCG has delivered a sophisticated private sector solution to help mitigate credit risk in a truly unprecedented time. We are proud to have participated in IDCG’s successful launch of its interest rate swap futures clearing offering.”
“We have the right product, the right technology, the right partner with NASDAQ OMX, and most importantly, we have launched this unique clearing solution at exactly the right time,” said Vincent Viola, IDCG Founder and Chairman.
The OTC interest rate market is the largest derivative asset class in the world, with an estimated $460 trillion dollars in notional principal outstanding as of June 2008 according to the Bank for International Settlements. It is also estimated that over a trillion dollars in notional principal trades every day. Because interest rate swaps are traded over the counter, the structure of this market is largely opaque, and participants bear substantial counterparty credit risk. The use of a centrally cleared platform for OTC IRS contracts provides an alternative to these problems.
“The marketplace for interest rates swaps is evolving and centralized clearing will be part of the new landscape. We believe other market participants will embrace this as we have,” says Matt Gelber, CEO of TradeLink, an IDCG market participant.
“We built our systems and operations, filed our CFTC application, collected customer commitments, received regulatory approval and began clearing IRS contracts all in 2008, says Chris Edmonds, IDCG CEO. This expedited timeline reflects the absolute commitment our team has as well as the market demand for a private sector solution to the current credit market turmoil.”
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