A clearinghouse is seen as a necessary step for getting a handle on the
$50 trillion over-the-counter CDS market and the best way to begin
removing counterparty risk from the system. However, regulators still
have to figure out just how many clearinghouses there will be and which
agency will have authority over them.
In addition to IntercontinentalExchange, the SEC is fast-tracking the
process to become a clearinghouse for CME Group Inc., NYSE Euronext and
Eurex, according to a document obtained by Reuters. According to the
SEC document, a central counterparty would be eligible for exemption
from certain agency registration requirements if it meets certain
conditions. Those conditions include giving the SEC access to conduct
on-site inspections of the central counterparty's books, records,
facilities and systems.
The Fed, Treasury and SEC hope to have a clearinghouse or
clearinghouses operating by year's end, but they will have to work through the
sticky issues of regulation and the international implications of
setting one up on Asian and European CDS markets as well. -
George White
See ICE press release
See Reuters story
Regulators took a big step toward establishing a clearinghouse for credit default swaps Wednesday when the Federal Reserve made IntercontinentalExchange Inc.'s ICE US Trust LLC a member of the Federal Reserve System so that it can begin acting as a central counterparty for the controversial derivatives.
