CME accepts gold as collateral for trades

The clearing house of global exchange CME Group - CME Clearing - has announced it will now accept gold as collateral for trades on the exchange.

Gold is the first commodity that can be used for margins for CME trades, ranging from crude oil, gold, grains, equity indexes and Treasury bonds.

"During conversations with the London bullion market, it became clear that a lot of participants were holding physical gold, and this was proving costly to them," says Jeremy Hughes, spokesperson for CME Clearing. "They were interested to find out if they would look at accepting gold as collateral as an alternative to debt or equities."

"They find depositing gold more cost-effective than financing other forms of collateral, so it creates added efficiency," he says.

From October 19 firms will be able to post physical gold to CME Clearing to cover non-segregated performance bond requirements.

Initially, gold will be deposited at JP Morgan Chase Bank in London, but the exchange hopes to add additional depositories in future.