As LCH.Clearnet transfers its credit default swap (CDS) clearing counterparty (CCP) ambitions from BClear to Paris-based Clearnet, arch rival CME Group has hired its ex-CEO Andrew Lamb to lead its own European CCP venture. Lamb assumes the role of CEO for CME Clearing Europe, subject, of course, to its approval by Financial Services Authority to become a UK recognised clearing house (RCH).
In this newly created position, Lamb will act as a special advisor to CME Group during the approval process and, subject to recognition, will serve as CEO, responsible for the development of strategic initiatives, risk management policies and day to day operations for CME Clearing Europe.
CME Clearing Europe is one of the contenders in the OTC derivatives CCP race, although it is considered to be some way behind the two frontrunners in the European leg: Eurex Clearing and IntercontinentalExchange (ICE). The CME’s venture will be based in London and aims to service the whole of the European market.
These clearers are being established with a view to reducing counterparty credit risk between participants in the OTC derivatives markets. Although ICE has already launched its ICE Trust platform in the US, European regulators have been insistent that European-based CCPs also be launched by the end of July. They are concerned that reliance on a CCP out of their jurisdiction will throw up a number of issues regarding regulation, supervision and monetary policy.
Craig Donohue, CME group CEO, explains the rationale behind the launch of its CCP: “Based on growing demand for centrally cleared solutions in global financial markets, our efforts to launch CME Clearing Europe are intended to provide greater efficiencies to our European customer base during local market hours. The EMEA region has been a significant source of growth for our business, and volume during non-US trading hours has grown to more than 14% of CME Group volume overall. As part of our global growth strategy, CME Clearing Europe will help to extend the safety and security of CCP to our European clients, both through the initial offering of CDS clearing and additional locally relevant products we plan to offer in the future.”
CME Group is therefore hoping to tap Lamb’s local market experience to its own end. After all, he spent more than 30 years improving financial markets infrastructure, while he was head of risk and deputy CEO at London Clearing House for 10 years and during his two years as CEO and director of LCH Clearnet. Lamb also served for 15 years at the Bank of England, including four years as senior advisor, derivatives and commodity markets.
Lamb most recently worked as an independent consultant for private and public companies on clearing, risk management and settlement, including among his customers the Futures Industry Association (FIA), the Futures and Options Association (FOA), and various US and European investment funds.
Given that CME Group appears to have a bit of catching up to do in the European CCP race, perhaps Lamb’s appointment will give it a boost?