Swapstream, the market-leading multilateral electronic trading platform for interest rate swaps (IRS) and subsidiary of CME Group, today announced that 33 buy-side participants have committed to an Early Adopter Program (EAP) for CME Swaps on Swapstream, the first centrally-cleared interest rate swaps available to all over-the-counter (OTC) market participants. The new CME Cleared Swap Product will trade on Swapstream’s sProTM platform and will be centrally cleared through CME using its OTC clearing solution, CME Clearing360TM.
The firms, representing a wide spectrum of US, European and Middle Eastern financial institutions, will lead the effort to bring this new and innovative product to the $271 trillion interest rate swap (IRS) market. They will be the first financial institutions to benefit from the balance sheet and operational efficiencies through central counterparty clearing and straight through processing, offered by CME Swaps on Swapstream.
The new participants include banks, mortgage banks, asset managers, hedge funds and proprietary trading firms:
Abu Dhabi Commercial Bank
Allston Trading, LLC
BMO Capital Markets Corp.
Capstone Investment Advisors
Capula Investment Management
Centaurus Capital Ltd.
Citadel Investment Group
Commerzbank Group Treasury
Countrywide Financial Corporation
DRW Holdings, LLC
Elcano RV Fund
Henderson Global Investors Ltd.
Infinium Capital Management, LLC
Julius Baer Investment Management, LLC
Lancelot EAM AB
Landesbank Berlin AG
Malbec Partners, Inc.
NewSmith Asset Management LLP
Nylon Capital LLP
Pictet Asset Management
RGM Advisors, LLC
Rho Trading Securities, LLC
Rubicon Fund Management LLP
Telluride Asset Management, LLC
The Clifton Group
Twinfields Capital Management
Voyageur Asset Management, Inc.
Further participants are in advanced discussions and expected to join the program in the near future.
Under the program, participants have agreed to commit resources and to work closely with Swapstream and CME Group to be ready to participate in the beta and launch phases.
Joe Leitch of Rubicon Fund Management LLP said: "Like most firms, we are looking for the cost savings offered by this product but we also value that through it we are able to continue to conduct our business directly via our existing relationships."
Christian von Staudt, head of Interest Rate Risk Management at Commerzbank Group Treasury, said: "We think that the time is right for the launch of a centrally cleared interest rate swap. The trend towards standardization of fixed income products is in full swing since the introduction of the Bund Future more than a decade ago. Swapstream is creating a similar powerful instrument this time with the focus on credit risk mitigation in the IRS market."
Diego Megia, principal of Elcano RV Fund, said: "The recent credit crisis has emphasized how important it is to control our exposure and manage collateral and counterparty risk. CME Group and Swapstream bring us a product we need which will help us benefit from all the efficiencies of a clearing house without sacrificing the way we conduct our OTC business."
John M. Huber, chief Investment Officer at Voyageur Asset Management, said: "The costly and laborious process of getting ISDA documents in place for our clients as well as the operational and capital inefficiencies associated with trading interest rate swaps has kept us from trading this product in the past. CME Swaps remove these obstacles and will allow us to enter the interest rate swap market efficiently. We look forward to working with Swapstream and bringing this new and innovative product to our client base."
Jerome Guiot-Dorel, head of Interest Rate Swaps at Bred Banques Populaires, said: "The launch of this product will benefit from excellent timing. The subprime crisis which led to the LIBOR crisis has stressed the difficulties of managing a large book of swaps fixings. With this new tool, we will be able to handle the seasonality of LIBOR fixings much better. This product could transform the interest swap market."
Stephane Rio, ceo of Swapstream, said: "The commitment by this wide range of banks and investors to trade this first centrally cleared interest rate swap is a reflection of the very large appetite from OTC market participants to reduce their credit exposure, reduce costs and streamline processing of one of the most widely used OTC instruments. We are delighted with the confidence these organizations have expressed in our product and our platform."
CME Swaps on Swapstream are expected to launch in a beta phase by March 2008 and go live in the second quarter of 2008.