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Exchange Operators Call for CDS Clearing to Become Mandatory

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The contenders in the clearing counterparty (CCP) race have indicated that they wish for credit default swap (CDS) clearing to be made mandatory. Testifying before the US Congress, the four exchange operators involved in the CCP space, IntercontinentalExchange (ICE), the Chicago Mercantile Exchange (CME) Group, NYSE Euronext’s Liffe and the Eurex derivative division of Deutsche Börse, called for the introduction of relevant legislation to make clearing mandatory.

Terrence Duffy, executive chairman of CME Group, said: “Our solution offers regulators the information and transparency they need to assess risks and prevent market abuse.”

The idea of mandatory clearing was supported by the House Agriculture Committee chairman Representative Collin Peterson. However, other lawmakers have expressed concern that multiple CCPs with different regulators would push volumes to the system deemed to be the least restrictive.

Banks at the hearing including JPMorgan, Goldman Sachs and UBS indicated that regardless of whether it was made mandatory, they would use the new clearing platforms.

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