London-based derivatives exchange Liffe, which launched its joint central clearing solution with LCH.Clearnet for credit default swaps (CDSs) in Europe on December 22, will roll out the service to US customers in the next few weeks.With competing initiatives to clear CDSs in the US stuck in regulatory limbo, Liffe and LCH's effort - which utilises the existing BClear platform - could steal a march on its rivals, including the Chicago Mercantile Exchange (CME) and the IntercontinentalExchange (Ice).
The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have already given the green light to the Liffe-LCH platform. Crucially, unlike the other clearing solutions, it does not also require approval from the Federal Reserve Bank of New York.
Theoretically, this means Liffe could roll out the service, which initially covers CDSs referenced to Markit iTraxx Europe, Crossover and Hi-Vol indexes, to US customers at any time. But although the exchange intends to go live in the US in the next few weeks, much of the early focus will be on a marketing campaign for users largely unfamiliar with BClear, an established platform for equity derivatives in Europe.
"The process is easier in Europe, where clients already use BClear, and you can actually bring people in to meetings to validate what you're saying. In the US, we don't have that yet," said Ade Cordell, head of wholesale services at Liffe, adding that the exchange intends to begin clearing US index trades in the first quarter.
As for Liffe's US competitors, CME has approval from the CFTC and the New York Fed but is still waiting for the go-ahead from the SEC. Atlanta-based Ice is awaiting regulatory approval from the Fed and exemption from the SEC, but Ice Trust - a new entity established to clear CDSs - has been approved.
A spokesman for Ice told Risk: "There is no less urgency by the regulators to get CDS clearing started than there was earlier in 2008, so we're pushing ahead and remain operationally ready to launch".
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