Newedge USA, LLC, a global leader in multi-asset clearing and brokerage, announced today that it has successfully executed and centrally cleared over $2 billion in client interest rate swaps on the Eris Exchange platform, an exempt board of trade under CFTC regulation, with clearing services provided by CME Clearing.
Newedge’s activity since connecting to Eris Exchange in August 2010 demonstrates the effectiveness of central counterparty clearing of OTC interest rate derivatives and the constructive role a clearing broker such as Newedge, with its diversified client base and independent business model, can play in the process.
Newedge, which is currently one of the largest US Futures Commission Merchants (based on customer segregated funds) according to CFTC rankings, has connected to Eris Exchange for the purpose of broking between exchange members to execute client interest rate swaps. Counterparties executing OTC interest rate swap transactions can reduce their risk by trading on Eris Exchange with Newedge as their executing and clearing firm.
The Eris Exchange Interest Rate Swap futures product is designed to model a standard fixed vs. floating USD denominated interest rate swap on the 3-month LIBOR index, except accruals are included in the price. Customer positions will clear through CME Clearing as segregated (30.7) secured accounts. Newedge is eligible to clear these contracts in its capacity as a CME Class A clearing member.
Nicolas Breteau, Newedge ceo says: “Private initiatives such as Eris Exchange can help create a safer environment for OTC interest rates swaps transactions and clearing. Newedge’s Eris initiative shows our commitment to deliver solutions for the IRS asset class, the largest of the OTC derivative markets*. The fact that we are involved in both the transaction and the clearing was an important factor in our decision to connect to the Eris Exchange platform. We are fervent supporters of both pricing and post-trade transparency, and view this as the best way to create value for our buy-side clients”.
Newedge is an established participant in cleared OTC commodity swaps through CME ClearPort, ICE Clear Europe, SGX AsiaClear and the International Derivatives Clearinghouse. The firm also expects to evaluate and participate as a broker in additional platforms that centrally execute and clear OTC swaps transactions.
* According the Bank of International Settlements, globally, interest rate swaps notional amount outstanding was over $400 trillion as of December 2009.
