NYSE Liffe shuts down CDS clearing service
Derivatives exchange NYSE Liffe and London-based clearing house LCH.Clearnet have shelved their central clearing service for credit default swaps (CDS), having processed no trades since it was launched in December last year.
The exchange officially suspended the CDS contracts offered for clearing (series 8, 9 and 10 of the Markit iTraxx Europe investment grade, Crossover and Hi-Vol CDS indexes) on July 29 following a month-long review of the service.
An official at the exchange told Risk Liffe would consider venturing into the CDS market again, but declined to elaborate.
Atlanta-based IntercontinentalExchange (Ice) and Frankfurt-based Eurex have both begun clearing CDS contracts. Ice cleared $1.67 trillion of trades in the US between March 9 and August 7, and has cleared €37.93 billion in Europe since launching a regional service on July 29.
Eurex, which launched its platform on July 30, has cleared two trades worth a combined €75 million. A clearing initiative by the Chicago Mercantile Exchange has yet to get off the ground despite receiving regulatory approval.
In an interview with Risk in January, Ade Cordell, Liffe's director of over-the-counter services, presciently said there would not be enough business to sustain four clearing ventures. "The market will decide which platform or platforms they want to use. I wouldn't be surprised if four gets whittled down to three pretty quickly, and three may well go to two."
Cordell anticipated Liffe’s platform would attract volumes because it targeted buy-side firms. However, those firms are typically reliant on banks for clearing services, meaning their dealers would also need to sign up to the central counterparty. But the dealers have converged on to Ice’s platform, and Eurex’s to a lesser degree.
See also: NYSE Liffe’s CDS clearing platform in doubt
Liffe awaits CDS clearing trade
Breath of Liffe
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Ruled out: can regulators settle the pre-hedging debate?
Market participants are at odds over the practice and whether regulation or principles can settle the score
SEC streamlines overhaul of stock trading rules
Tick size and access fee rules simplified from first draft, but Peirce still questions rationale
Supervisors use generative AI to tame ‘chaotic’ data
Officials merge credit databases with unstructured reports to sharpen bank oversight, explains Banco de España ex-deputy
EU banks fear loss of NSFR repo relief
European Commission must decide by next June; other jurisdictions adopted softer calibration
Running the numbers on Barr’s Basel III endgame revisions
Fed vice-chair’s plan to ease capital requirements for big banks still lacks critical details
Endgame manoeuvre: US banks put SLR reform back in spotlight
Plan to ease Basel III brings renewed focus to impact of leverage ratio on US Treasury market
Regulators want to fix AT1s. Investors want restraint
Tweaking the instrument that regulators love to hate may be the only way to prevent its abolition
More disclosure touted to temper pre-hedging ills
Transparency could help investors choose a dealer, but will they use the disclosures?