Summary
The industry looks to have “blinked” under pressure from their governments (or sponsors depending on how one views the situation) amidst a threat of EU legislation.
Analysis
Aided and abetted by pressur from governments, Commissioner McCreevy’s threat of legislative action has cowed two key players ISDA (the OTC derivatives trade body) and the European Banking Federation (EBF).
That is a big result for the EU but now the process moves on to how to build the silo and the big question of who to operate it? The elbow sharpening at LIFFE, LCH.Clearnet, EUREX and ICE will be enormous right now.
At this stage it is difficult to tell just who will win but in the meantime, there will be a massive amount of work going into convincing the banks that the exchange derived platforms can work according to the banks’ definition of “customer centric”…
Oh, and of course there is also the issue of that possible spoiler bid for LCH.Clearnet – could an “industry” bid buy the CDS CCP that the industry prefers?
Whichever way one looks at it, the industry as demonstrated by actions in the USA is not about to sacrifice its CDS cash cow to the wiles of commoditised low cost exchanges without a big fight and that may leave both LIFFE and EUREX with issues in trying to win the beauty pageant.
CCP may be coming but that is still a long way from exchange trading…
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