Liffe announced today that the Exchange is planning to launch Credit Default Swap (CDS) contracts on Bclear in Q4 2008.
Liffe CDS contracts will be based on the Markit iTraxx European indices.
The move marks a significant expansion of Liffe’s award winning Bclear service from equity derivatives into a new asset class.
Liffe CDS contracts on Bclear will combine the security of central counterparty clearing with the flexibility that OTC market participants demand. Pre-negotiated trades that are agreed off exchange will be booked into a proven OTC clearing solution, addressing the operational and systemic risk concerns that are at the forefront of discussions between regulators and industry bodies.
Garry Jones, executive director of Business Development and Strategy at Liffe, commented: "We are pleased to announce the launch of CDS contracts on Bclear. Liffe is the first exchange to work with the market by launching CDS contracts rather than credit futures or options, and by allowing business to be pre-negotiated and booked into a secure exchange and clearing house environment. The proven success of Bclear for other derivatives puts Liffe in a unique position to offer this exciting service for CDS."
Bclear is the on-exchange administration and clearing service that provides a simple and cost-effective way to register and process wholesale derivatives trades through Liffe to clearing at LCH.Clearnet Ltd. This can reduce the counter-party credit, legal and operational risks associated with OTC deals.