Following the announcement by the regulatory community that it will be working together to oversee the credit default swap (CDS) central counterparty clearing (CCP) market, the interdealer broker community has also indicated its commitment to the European initiatives. According to an announcement by the International Swaps and Derivatives Association (ISDA), nine of the largest players in the market have signed a letter to European Commissioner for Internal Market and Services, Charlie McCreevy, confirming their engagement to use EU-based central clearing for eligible EU CDS contracts by end July this year.
“These efforts mirror the engagement the industry has made in other jurisdictions in the interests of a globally cohesive regulatory framework for clearing,” says the association.
The firms committed to the CCP endeavour are Barclays Capital, Citigroup Global Markets, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley and UBS. The letter also commits these firms to work closely with infrastructure providers, regulators and the European Commission in resolving outstanding technical, regulatory, legal and practical issues.
According to ISDA, each firm will make an individual choice on which CCP might best meet its risk management objectives, subject to regulatory approval of any such clearing house in Europe.
Eraj Shirvani, ISDA chairman and head of fixed income for EMEA at Credit Suisse, reckons the agreement is the first step for the industry to make clear its agenda to the regulatory community. “This commitment provides the basis for constructive dialogue with the European Commission, both on arrangements for central clearing and on related regulatory matters. ISDA and its member firms will continue to work closely with the European Commission, national and international regulators and infrastructure providers to ensure a sound and efficient regulatory framework for central clearing of the CDS market,” he explains.