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CME Group and Citadel Investment Group announced the launch of the first electronic trading platform that is fully integrated with a central counterparty clearing facility for Credit Default Swaps (CDS). CME Clearing, the world's largest derivatives clearing house, will be the central counterparty for this solution.
The joint venture will operate as an independent organization with its own board of directors and management team. CME Group and Citadel have invited major CDS market participants to join as Founding Members by allocating up to 30 percent of the equity in the venture, and by offering certain market maker privileges to such Founding Members.
“In today's environment, effective risk management is more important than ever as investors seek transparent, secure and liquid market alternatives, particularly for credit default swaps," said CME Group Executive Chairman Terry Duffy. "Combining Citadel's leading CDS technology with the renowned safety and soundness of CME Clearing, this joint venture is a best-of-both-worlds solution that will reduce much of the systematic risk inherent in the current CDS market structure."
"This platform provides an important opportunity for market participants to demonstrate to customers and regulators alike how these markets can be better organized to meet legitimate hedging and trading needs while reducing operational and credit risks that have grown unchecked in the OTC market", said Craig Donohue, Chief Executive Officer of CME Group.
Platform participation is open to all qualified commercial market participants. The launch of trading is subject to completion of definitive agreements and any necessary regulatory approvals.