On 22 December 2008 Liffe and LCH.Clearnet Ltd are jointly launching credit default swap (CDS) index contracts on Bclear.
Liffe, the global derivatives business of NYSE Euronext (NYX), becomes the first exchange to offer clearing of CDS contracts. The CDS clearing offered via Bclear will initially cover the Markit iTraxx Europe, Market iTraxx Crossover and Markit iTraxx Hi-Vol indices.
CDS contracts on Bclear will combine the security of central counterparty clearing with the flexibility that OTC market participants demand. The contracts are negotiated and agreed away from the exchange before being processed through Bclear and cleared through LCH.Clearnet.
The contracts reference ISDA 2003 Credit Derivative definitions, and in the case of credit events settle using the Final Price of ISDA Credit Event Auctions.
We have worked closely with market participants, ISDA and LCH.Clearnet to ensure our contract design meets the market’s requirements, says Garry Jones, executive director, Liffe. We have actively participated and will continue to participate in regulatory and industry discussions on CDS clearing. We look forward to offering more CDS products as we move into 2009.
We are leading the way in establishing a credible central counterparty service for CDS indices, says Roger Liddell, chief executive officer, LCH.Clearnet. This is an important step towards allaying growing regulatory and investor concerns over the integrity of the CDS market. We are pleased to extend LCH.Clearnet’s broad range of asset classes.