The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

LCH.Clearnet Plans to Launch European CDS Clearing by December

Share article

Following repeated calls by European Commissioner for Internal Market and Services, Charlie McCreevy, for a European clearing service for credit default swaps (CDS), LCH.Clearnet has decided to step up to the plate. The service would be based in Paris and will be launched by December, pending regulatory approval, says the firm.

Christophe Hémon, CEO of the firm, explains that its offering will be aimed at reducing counterparty risk in the European CDS market. “We are leveraging expertise from across the group to deliver the benefits of clearing to the euro zone CDS market,” he elaborates.

Prior to the announcement by LCH.Clearnet, McCreevy had gone as far as threatening legislation in the CDS market to spur on the industry to action. In January, he told a conference in Brussels that he was “open the option of legislating” to get a European clearing counterparty (CCP) in place before the end of the year. No doubt he will be pleased at the decision by LCH.Clearnet to take heed of his warnings.

European legislators are keen to establish a European CDS CCP in order to prevent the risk associated with these OTC derivatives being concentrated in the US market. There are also concerns from the Commission that European regulators would be at a disadvantage dealing with an entity out of their jurisdiction.

However, industry associations including the International Swaps and Derivatives Association (ISDA) and the Futures and Options Association have both spoken out against a European solution in favour of a “global” option.

ISDA is strongly against the idea of multiple regional clearing houses and has been championing the establishment of a single CCP for all trades. Eraj Shirvani, the chairman of ISDA and the head of European credit at Credit Suisse, has indicated that the association is keen to establish “global dialogue with all concerned regulators as a matter or priority”.

LCH.Clearnet has also recently been garnering headlines due to the rumoured ongoing discussions between the Depository Trust and Clearing Corporation (DTCC) and a consortium of financial institutions including interdealer-broker Icap over a possible takeover of the clearing firm. DTCC is said to be going head to head with the consortium in a bidding war for LCH.Clearnet, although the consortium has not yet publicly announced its intentions.

Related content

WEBINAR

Upcoming Webinar: Managing the transaction reporting landscape post Brexit: MiFID II, SFTR, EMIR

Date: 16 March 2021 Time: 10:00am ET / 3:00pm London / 4:00pm CET Duration: 50 minutes The transaction reporting landscape has, for many financial institutions, expanded considerably in size since the end of the UK’s Brexit transition period on 31 December 2020 and the resulting need for double reporting of some transactions to both EU...

BLOG

Time for Financial Institutions to Take Back Control of Market Data Costs

By Yann Bloch, Vice President of Product Management at NeoXam. Brexit may be just around the corner, but it is market data spending that financial institutions are more interested in taking back control of right now. In fact, other than regulatory equivalence post the transition period, it is hard to think of a more prominent...

EVENT

Data Management Summit New York City

Now in its 10th year, the Data Management Summit (DMS) in NYC explores the shift to the new world where data is redefining the operating model and firms are seeking to unlock value via data transformation projects for enterprise gain and competitive edge.

GUIDE

Regulatory Data Handbook 2020/2021 – Eighth Edition

This eighth edition of A-Team Group’s Regulatory Data Handbook is a ‘must-have’ for capital markets participants during this period of unprecedented change. Available free of charge, it profiles every regulation that impacts capital markets data management practices giving you: A detailed overview of each regulation with key dates, data and data management implications, links to...