The move creates the next battleground between global clearing houses in the processing of over-the-counter (OTC) derivatives since some of them launched clearing of credit default swaps in 2009. It also comes amid growing uncertainty over how profitable OTC derivatives clearing will be as the industry looks to make sense of how the Dodd-Frank Act, passed last year, should be implemented.
SwapClear has dominated clearing of OTC interest rate swaps traded between dealers for a decade. But its move into the clearing of products that are used by non-banks such as asset managers, hedge funds and Fannie Mae and Freddie Mac, the US mortgage lenders, marks its entry into a market segment where the Dodd-Frank Act requires the use of clearing for the first time.
LCH.Clearnet has been forced to come up with an innovative clearing solution for the US, where some market participants had been uneasy about the clearer’s London base. Bankruptcy laws, important in the management of a default, differ in the UK from those in the US.
Full article (FT subscription needed)
© Financial Times
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article