State Street has launched a swaps clearing platform as market participants anticipate the Dodd-Frank requirement that most swaps in the US be traded through central counterparty (CCP) clearing houses.
Parties to centrally cleared swaps trades soon will be required to work through a futures commission merchant (FCM) that acts as intermediary between its clients and the CCP. The new regulations will also impose collateral requirements and real-time reporting requirements designed to reduce counterparty credit risk and bolster market transparency.
“As the derivatives markets evolve, we are increasingly aware of the need for full-service clearing and other services to help clients realize the benefits of the new derivatives regime, through enhanced transparency, more open execution platforms and central clearing,” says Clifford Lewis, executive vice president and head of State Street’s eExchange business.
State Street is not the first to jump on the CCP bandwagon as service providers see an opportunity in the imminently mandatory central clearing. Goldman Sachs, for one, launched a derivatives clearing service just a week after Dodd-Frank was signed by President Obama.
The derivatives clearing offering will utilize State Street Global Services as well as eExchange, a division of State Street Global Markets.
State Street’s new derivatives clearing capabilities are a key component of our derivatives offering, which now includes clearing, end-to-end OTC and exchange-traded derivatives servicing, collateral management, and independent valuation, providing our clients the option of either a complete solution for derivatives or a component-based approach tailored to their specific needs, says Jeff Conway, executive vice president and head of Investment Manager Services at State Street.
(CG/CM)