Eurex Credit Clear – the European OTC clearing solution for credit default swaps – to start on 30 July 2009
Launch in line with the implementation of the industry self-commitment to the European Commission/ Approval of SEC and FSA obtained/ Eurex Clearing to offer CCP-clearing of European iTraxx® indices and European single name CDS/ Eurex Credit Clear major step to improve market safety and integrity for OTC derivatives
Eurex Clearing, Europe’s largest central counterparty (CCP), announced today that Eurex Credit Clear, its new central counterparty solution for credit default swaps (CDS), will be operational by 27 July and start clearing on 30 July 2009. Eurex Credit Clear supports the implementation of the industry self-commitment given by nine major market participants to the European Commission to use an EU-based CCP for European CDS products by 31 July 2009.
The major advantages of Eurex Credit Clear are:
- Comprehensive product scope covering index and single name CDS
- Full STP integration into DTCC Deriv/SERV Trade Warehouse
- State-of-the-art risk management solution specifically designed for CDS
- Customer governance concerning product and service scope for CDS as well as economic participation
The initial product scope of Eurex Credit Clear covers a European CDS product suite of the iTraxx® benchmark indices and 17 single name iTraxx® index constituents from the utility sector. In a next step further European single names will be added to provide full coverage of the iTraxx® benchmark index constituents. Eurex Credit Clear is interlinked with the North American Depository Trust & Clearing Corporation (DTCC) Trade Information Warehouse to deliver straight-through-processing and seamless integration into the existing OTC market infrastructure.
For Eurex Credit Clear, Eurex Clearing has developed a CDS-specific state-of-the-art risk management model. Implementation has been supported by deploying proven application modules from Calypso Technology Inc., a leading provider of risk solutions for credit derivatives. Eurex Credit Clear was designed in close consultation with users and envisions customer governance of product and service scope as well as sharing the economics with the industry. On 23 July, the U.S. Securities and Exchange Commission (SEC) approved a conditional exemption that allows Eurex Clearing to operate as a central counterparty for clearing CDS. The new clearing service is also accessible for UK market participants after the regulatory approval by the Financial Services Authority (FSA) on 24 July.
Andreas Preuss, CEO of Eurex, said: “Central counterparty clearing is a stabilizing element for financial markets; based on effective risk management it significantly reduces systemic risk. Eurex Credit Clear is an important step in offering the benefits of CCP clearing to the OTC derivatives market as part of our overall strategy to expand clearing services for bilaterally traded products.”
Thomas Book, member of the Eurex Executive Board and responsible for clearing, added: “The key challenge in developing Eurex Credit Clear was to design and build a new risk management solution specifically to meet the unique risk characteristics of CDS. This new service significantly strengthens our clearing capabilities with a sound, reliable and flexible engine to deliver central clearing initially for credit derivatives and subsequently also for further OTC-traded asset classes.”
Eurex Clearing accomplished technical readiness for OTC CDS clearing as planned by the end of the first quarter 2009. Eurex Credit Clear is currently providing production simulation for 20 market participants and is intensively supporting market readiness to enable the industry to meet its self-commitment to the EU Commission.
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