Newedge USA, LLC, a global leader in multi-asset clearing and brokerage, announced today that it has successfully brokered and centrally cleared its first dealer-to-client interest rate swap transactions at the International Derivatives Clearinghouse LLC (IDCH), a derivatives clearing organization owned by the International Derivatives Clearing Group, LLC (IDCG) and regulated by the U.S. Commodity Futures Trading Commission.
The initial interest rate swap transactions totaled over US$100 million in notional value and involved asset manager and dealer clients – demonstrating 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 joined IDCH’s client clearing platform as a member in March 2010 and has successfully delivered all operational requirements to offer interest rate swap clearing services to end-user clients and liquidity providers.
Newedge, already a clearing leader for listed derivatives, is in a unique position to add value for participants in the interest rate swap market, the largest of the OTC derivative markets and a critical risk management tool for financial asset and liability managers*. Counterparties executing OTC interest rate swap transactions can reduce their risk by novating their positions to IDCH, with Newedge as their clearing firm. Counterparties will benefit from the clearinghouse performance guarantee and the proven segregated funds protections of the U.S. futures market.
“Our membership with IDCG is an important extension to the OTC clearing platform we offer our clients,” said Nicolas Breteau, Newedge’s ceo. “Newedge has devoted considerable resources in developing client OTC clearing solutions that add value and are open to all market participants. Our buy-side clients and liquidity providers are very interested in what we can provide across a range of OTC products, with interest rate swaps via IDCH now part of that offer.”
Newedge is already an established participant in cleared OTC commodity swaps through CME ClearPort, ICE Clear Europe and SGX AsiaClear. The firm also expects to evaluate and participate as a broker in additional platforms that centrally execute and clear OTC swaps transactions.
“Given the current regulatory activities, being able to provide our clients with this service is crucial,” said Marcus Katz, senior vice president of Newedge and lead on the IDCG project. “We also believe there is potential for considerable cost savings, materially lower risk, and significantly greater transparency for market participants employing central clearing through Newedge and IDCG.”
* According the Bank of International Settlements, globally, interest rate swaps notional amount outstanding was over $400 trillion as of December 2009.
