CME Group Opens Credit Default Swaps Initiative to Additional Partners and Focuses Solution on Clearing Services
September 18 2009 - 10:20AM
PR Newswire (US)
Buy and Sell-Side Firms Joining as Founding Members CHICAGO, Sept.
18 /PRNewswire-FirstCall/ -- CME Group, the world's largest and
most diverse derivatives marketplace, today announced that its
credit default swap (CDS) joint effort with Citadel Investment
Group will be restructured as a strategic program targeted at
providing clearing-only services for the nearly $27 trillion credit
default swap (CDS) market, effective immediately. Key features
developed as part of the joint effort with Citadel, which was known
as CMDX, will be carried forward in the clearing-only service,
including state-of-the-art trade booking and legacy trade migration
facilities. Citadel remains a founding member of the newly
restructured CDS initiative. The other buy-side founding members
are: AllianceBernstein, BlackRock, BlueMountain Capital Management,
the D. E. Shaw group and PIMCO. A number of leading sell-side
participants are in the process of becoming founding members. CME
Group plans to announce the launch of the clearing initiative's
pilot program in the weeks ahead. "We remain committed to bringing
stability and transparency to the CDS market, while further
enhancing confidence in the financial marketplace," said Terry
Duffy, Executive Chairman, CME Group. "Over the past several
months, we have been working closely with all market participants.
As a result of this collaborative process, we have refocused our
offering to provide clearing-only services. Both buy-side and
sell-side participants have expressed an interest in continuing to
execute their CDS transactions the same as they do today, but with
the added benefit of central counterparty clearing." "With the
increasing collaboration of key founding members from both the buy-
and sell-side, we are confident our offering remains the strongest
and most effective CDS clearing solution available," said Craig
Donohue, Chief Executive Officer, CME Group. "Our solution offers
point of execution clearing of CDS trades, the greatest breadth of
products to clear which includes single name CDS, a comprehensive
and transparent risk management system, the security of our
approximately $8 billion financial safeguards package, and an
established regulatory framework to protect customer positions and
offer margining efficiencies." CME's clearing solution builds on
the existing over-the-counter (OTC) market, with ISDA-based CDS
contracts that are economically equivalent to the current OTC
contracts, and incorporates the proven benefits of CME Group's
straight-through-processing clearing model to deliver: -- A
time-tested regulatory segregation and portability framework that
protects both customer positions and margin in the event that a
clearing member defaults; -- Clearing of CDS trades at the point of
execution rather than through batch processing, which provides
immediate cleared trade confirmation and settlement and leaves no
window of credit exposure between bi-lateral parties to a trade
they wish to clear; -- Migration of legacy non-cleared positions to
cleared trades, simplified through use of existing market
infrastructure; -- The ability for investors to leverage their
existing relationships and connectivity with CME clearing members;
and -- CME Group's more than 100 years of experience in clearing,
settlement and risk management. Products supported at launch will
include a range of Markit CDX indices and liquid single name CDS.
CME Clearing also supports trade entry through its CME ClearPort
platform, enabling connectivity from any trading platform. More
information can be found at http://www.cmegroup.com/cds. About CME
Group As the world's largest and most diverse derivatives
marketplace, CME Group (http://www.cmegroup.com/) is where the
world comes to manage risk. CME Group exchanges offer the widest
range of global benchmark products across all major asset classes,
including futures and options based on interest rates, equity
indexes, foreign exchange, energy, agricultural commodities,
metals, weather and real estate. CME Group brings buyers and
sellers together through its CME Globex electronic trading platform
and its trading facilities in New York and Chicago. CME Group also
operates CME Clearing, one of the largest central counterparty
clearing services in the world, which provides clearing and
settlement services for exchange-traded contracts, as well as for
over-the-counter derivatives transactions through CME ClearPort .
These products and services ensure that businesses everywhere can
substantially mitigate counterparty credit risk in both listed and
over-the-counter derivatives markets. The Globe logo, CME, Chicago
Mercantile Exchange, CME Group, Globex, E-mini and CME ClearPort
are trademarks of Chicago Mercantile Exchange Inc. CBOT and Chicago
Board of Trade are trademarks of the Board of Trade of the City of
Chicago. NYMEX and New York Mercantile Exchange are trademarks of
New York Mercantile Exchange, Inc. COMEX is a trademark of
Commodity Exchange, Inc. All other trademarks are the property of
their respective owners. Further information about CME Group and
its products can be found at http://www.cmegroup.com/. CME-G
DATASOURCE: CME Group CONTACT: Media, Allan Schoenberg,
+1-312-930-8189, or Michael Shore, +1-312-930-2363, , or Investors,
John Peschier, +1-312-930-8491 Web Site: http://www.cme.com/
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