JSCC and Tokyo Financial Exchange Plan Introduction of IRS and CDS CCP

The Japan Securities Clearing Corporation (JSCC) and the Tokyo Financial Exchange (TFX) have confirmed that they are both planning to introduce clearing for credit derivatives this year, in the form of interest rate swaps (IRSs) and credit default swaps (CDSs). Both parties have been planning the move for around six months and are currently in discussions with other institutions and vendors concerning infrastructure and fees.

JSCC, which is majority owned by the Tokyo Stock Exchange, and TFX, which is member owned, are seeking to introduce clearing for these instruments in order to bring down settlement risk in the domestic derivatives market. The move is therefore similar to that of their US and European counterparts in the clearing central counterparty (CCP) race. It would also add another CCP contender to the global picture, which may not go down well in some corners of the market.

Currently, many Japanese institutions use LCH.Clearnet’s CCP to clear their IRSs and both JSCC and TFX have taken this into account and are already in talks with the London-based firm about establishing clearing links.