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Alternative Market Briefing

CME: Start preparing for swaps clearing under Dodd Frank Act now

Monday, June 03, 2013

Jack Callahan
Benedicte Gravrand, Opalesque Geneva:

Reform efforts in the US and around the world, including the EU, Australia and Japan, have been driving markets toward central clearing following the 2008 financial crisis.

Reform in the US has four key goals: to reduce systemic risk, improve transparency and market efficiency, maintain market integrity, and ensure client suitability for the trading of OTC derivatives, according to a UBS report. In Europe, the European Commission identified four complementary goals to increase financial stability: product standardization, market transparency, and the use of CCPs (central counterparty clearing houses) and organized trading venues.

In the US, mandatory clearing of OTC derivatives began this year; it was supposed to begin in 2011. In Europe, OTC contracts will have to be centrally cleared starting next year; again, it was meant to start in 2012. While most major dealers are already direct clearing members of a central counterparty, the vast majority of clients will have to establish clearing relationships with clearing service providers; one which is the Chicago Mercantile Exchange (CME).

Deadline: June 10 According to Jack Callahan, Executive Director of OTC products and services at CME Group, the new global rules for OTC derivatives will have significan......................

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