CME Clearing Europe, CME Group’s European clearing house, today announced that it has received FSA approval and launched real-time, open access clearing of Interest Rate Swaps (IRS). This is the first step in CME Clearing Europe’s expansion into clearing Over the Counter (OTC) financial derivatives and adds to what CME Group already has accomplished with clearing OTC IRS in the US and CME Clearing Europe’s existing energy and commodity business line.
The initial release of OTC IRS in Europe will include the launch of seven currencies: GBP, EUR, CAD, AUD, CHF, JPY and USD with maturities of up to 50 years for USD, EUR, GBP and 30 years for all others. The systems and processes for clearing IRS have been developed in close collaboration with swap dealers, clearing firms and buy-side participants, including BNP Paribas, Credit Suisse, Goldman Sachs International, HSBC, JP Morgan Securities Plc, Nomura International Plc and The Royal Bank of Scotland, who are all live and have completed dealer-to-dealer or dealer-to-client trades. In addition, Citibank, Morgan Stanley and UBS will be completing the onboarding phase in the coming weeks. The first trade was completed between JP Morgan Securities Plc and Aviva.
“Our overall aim is to provide a single, integrated platform offering operational flexibility across over-the-counter IRS, FX, CDS and commodities for our European clients. The expansion into IRS clearing deepens our offering, providing access to financial derivative clearing through our European platform, accommodating a broad base of international customers,” said Andrew Lamb, Chief Executive Officer of CME Clearing Europe. “We will be looking to expand this further with the launch of OTC FX and CDS later this year, and the provision of clearing services for CME Europe which, pending regulatory approval, will launch in the second quarter.”
“Further extending our European offering into financial products represents an important element for our clients to manage their risk. As an industry leader in OTC IRS clearing services, CME Group enables our clients to benefit from greater capital efficiencies and flexibility,” said Laurent Paulhac, Senior Managing Director, CME Group, Financial and OTC Products and Services. “The market for interest rate products continues to grow and is active on a global basis and we continue to work to provide products that set benchmarks for clients’ expectations.”
Shahid Ikram, Chief Investment Officer at Aviva Investors said: “Aviva Investors view OTC derivatives as integral to the investment management process, enabling us to better manage our clients’ portfolios and to capture investment performance on their behalf. It is key for us to have the necessary infrastructure in place to continue to use OTC derivatives to add value to our clients’ portfolios.”
Paul Twohey, European Head of OTC Clearing at Credit Suisse stated: “We welcome the roll out of CME Clearing Europe’s OTC Clearing Platform, providing market participants with an increased choice of venues at which to clear their OTC positions in line with regulatory requirements.”
“We are delighted to be the first to complete a cleared trade for Aviva, one of our key clients, on CME Clearing Europe’s platform,” said Hester Serafini, global co-head of OTC Clearing at J.P. Morgan. “With the U.S. now already underway with swaps clearing, this is a significant step for the European market and a template as we build towards mandatory clearing under EMIR.”
To date, CME Clearing in the U.S. has cleared more than $1.75 trillion in OTC interest rate swap volume, and open interest has grown to more than $1 trillion. In addition, CME Group began listing and clearing on 13 November in the U.S. Deliverable Interest Rate Swap Futures contracts, listed by and subject to the rules of CME, providing access for U.S. customers to interest rate swap exposure.
