Ice clears $71 billion of CDSs

Atlanta-based derivatives exchange IntercontinentalExchange (Ice) has cleared $71 billion notional in credit default swaps (CDS) in the four weeks since the launch of its central clearing platform. The exchange cleared 613 transactions and reported open interest totalling $12.7 billion.

Ice commenced central clearing of CDSs on March 9 via Ice Trust, a New York limited liability trust company. According to an official at Ice, the initial focus has been on clearing backlogged trades. "The trades it has cleared thus far have all been linked to series 10 and 11 of the Markit CDX North American investment grade indexes," the representative explained.

According to a statement by Dirk Pruis, president and chief operating officer of Ice Trust, the company anticipates "a solid ramp-up in activity in the coming weeks" as the initial limits on volumes recommended by regulators come to an end.

Ice's fortunes on the CDS clearing initiative differ markedly from its competitors. NYSE Liffe, the global derivatives business of NYSE Euronext launched its CDS clearing service on December 22 in partnership with London-based LCH.Clearnet to cover series 8, 9, and 10 of the Markit iTraxx Europe, Crossover and Hi-Vol indexes, but has yet to clear any trades.

"We have around 30 users signed up, but participants are still completing the software development and systems-integration work that is necessary to trade these contracts via BClear," remarked a spokesperson at Liffe, while declining to comment on when exactly it expects to start clearing trades.

Chicago-based exchange CME Group received approval to clear CDSs via its electronic clearing platform - a joint venture with hedge fund Citadel called CMDX -from the US Securities and Exchange Commission on March 13, but has faced hurdles in getting customers to sign up to the platform. CMDX has no signed commitments but remains in discussions with potential end-users, an official told Risk.

CMDX plans to trade and clear 75% of index and CDS products, including the highest-volume CDX and iTraxx indexes and their single-name constituents.

Frankfurt-based derivatives exchange Eurex had initially planned to clear 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, a spokesperson from Eurex stated it now expects to launch the service by July.

See also: CME's CDS platform approved
CME Group one step closer to CDS clearing
Dealer predicts 85% of CDSs could be centrally cleared by end of 2009
Ice launches US CDS clearing service
Eurex postpones CDS clearing