- Patrick Young
- Bloomberg.com: ICE Starts Credit-Default Swap Clearing in Bid for $400 Million
- www.bloomberg.com
Summary
Intercontinental Exchange (ICE) has muscled its way to the forefront of the CDS clearing issue as a result of their classic opportunistic streak. Their solution may have the dge over other competitors not just as a result of early regulatory permission but also thanks to its more exclusive business model.
Analysis
Finally a CDS clearing venue in the USA has been launched after much discussion and it seems that ICE has the backing of the marketplace itself. However, this is no flat democratic futuress/options style clearing house but rather via the auspices of the Clearing Corporation (nee BOTCC) and ICE Clear itself, this is a club only for entities with a 5 billion dollar balance sheet and at least an “A” rating.
That lack of flat “open plan” trading ought to appeal to the banks who don’t want to see a cash cow being milked through commoditisation by the “great unwashed” of all and sundry traders throughout the world.
ICE is leveraging its own beginnings as an investment bank backed platform to create an exclusive venue where transparency is available for regulators but the CDS market can continue to function with bank profit margins largely unhindered.
It is an intriguing venture and once again a good example of Jeff Sprecher’s innate opportunism. His purchase of Creditex last year gave him a foothold in the more sophisticated OTC money market products markets, then his successful bid for the Clearing Corp provided a solid base for the clearing of CDS in an exclusive environment. The established exchanges by comparison so far have failed to really see a measurable interest in their product offerings for CDS whether already trading (NYSE LIFFE, EUREX) or not (CME).
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