ICE Makes A Sound CDS Clearing Start

• Analysis by: Patrick Young
• Analysis of: Intercontinental Clears $7.15 Billion in Credit Swaps (Update2) – Bloomberg.com
• Published at: www.bloomberg.com

Summary

The ICE CDS facility is open for business and even has business to transact! – That’s an interesting development in the CDS market and one which will leave competitors such as CME, EUREX and LIFFE somewhat green with envy.

Analysis

Given that previous attempts to provide a more commoditised service clearing (and even trading) Credit Default Swaps (CDS) has been a resounding failure, the opportunistic Jeff Sprecher seems to have hit a rich seam even during the first week of operations.

True, the majority of cleared trades happen to have been novated into the CCP without neccessarily being recent trades but the fact that an “Open Interest” remains at all is the key issue. The marketplace seems to want to use the more “exclusive” ICE proposition currently and may make it difficult for the more conventional futures exchanges to gain much traction. CME is entering the frey imminently as a result of its authorisation being received last week while LIFFE’s facility remains a somewhat uncherished orphan. EUREX plans to re-launch soon, although its original facility was also unsuccessful in Europe.

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