Speaking on a July 26 earnings call, CME Group CEO Phupinder Gill said that more buy side firms are expected to begin clearing OTC swaps, ahead of an expected February 2013 required clearing deadline.
In addition to several companies that began clearing OTC swaps over the last few weeks, many others have completed testing their clearing processes, but will not begin utilizing them until required to do so.
The CFTC’s recent finalization of a rule defining swaps has triggered provisions in other rules, including mandatory clearing, whose effective date depends on the publication date of the swap definition. While the exact compliance date is still uncertain, the prospect of mandatory clearing is a reality, and firms that have delayed planning for it are rushing to catch up.
As demand for OTC clearing grows, competition between clearing houses is heating up, with LCH.Clearnet and the Intercontinental Exchange challenging CME with offerings such as a wider range of acceptable collateral types and clearing less common instruments such as variable notional swaps. CME has responded by announcing the establishment of a clearing link in collaboration with Bloomberg. Nodeliverable forward (NDF) trades that are electronically executed on Bloomberg’s foreign exchange platform, FXGO, will be cleared through CME’s clearing brokers.