Eurex postpones CDS clearing

Eurex had previously committed to clearing CDS trades linked to series 7, 8, 9, 10 and 11 of the iTraxx Europe, Hi-Vol and Crossover indexes by the end of the first quarter, and single-name trades in the second half of the year. However, an official told Risk today that the launch date will be pushed back to the end of the second quarter because the necessary systems work required by dealers and buy-side clients to connect to the clearing service will take a few months to complete.

The official said that while Eurex will be technologically ready to clear CDS trades at the end of March, it is reluctant to roll out its service before users are able to access it. The postponed launch is also planned to tie in with the commitment made on February 19 by nine major dealers to use a European Union-domiciled central counterparty for clearing CDSs by the end of July.

A European clearing solution for CDS trades was launched by London-based derivatives exchange NYSE Liffe and London-based clearing house LCH.Clearnet on December 22, to clear trades linked to series 8, 9 and 10 of the Markit iTraxx Europe, Hi-Vol and Crossover indexes. However, the service has yet to process a single trade, as no users have completed the systems integration work needed to connect themselves to the clearing platform.

LCH.Clearnet also plans to clear CDSs in the eurozone from its Paris-based subsidiary by the end of the year and is in discussions with Liffe to expand their partnership.

Additionally, Atlanta-based firm the IntercontinentalExchange plans to clear credit derivatives in Europe by the end of July. The company was granted an exemption order by the US Securities and Exchange Commission (SEC) on Friday March 6, to begin clearing CDSs linked to CDX North American indexes, including investment-grade, investment-grade high-volatility sub-indexes and high-yield indexes.

Meanwhile, Ice's US rival the Chicago Mercantile Exchange - which is still waiting for SEC approval for its US clearing service - also plans to clear CDSs in Europe this year.

See also: Banks agree to EU CCP for clearing CDS
LCH.Clearnet to expand CDS clearing into eurozone
Breath of LiffeFed approval leaves Ice/TCC on brink of CDS clearing
Trichet: Eurozone CCP will help improve oversight

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