CME Group Inc. has launched a clearing service for interest rate swaps in London. The news comes a week after U.S. regulators began implementing mandates for rate swap clearing at CME’s headquarters.
Reuters reports that the exchange operator’s London-based CME Clearing Europe won approval from the U.K.’s Financial Services Authority for the entity’s first venture into clearing over-the-counter (OTC) financial derivatives.
For nearly two years, the U.S. exchange operator’s CME Clearing Europe has focused primarily on commodity contracts and clearing energy swaps in London. This marks the first time the group is expanding into financial derivatives, and clearing interest-rate swaps for banks and buy-side firms through several major dealers.
CME’s new development brings the company into direct competition with the Eurex unit of Deutsche Börse AG, and LCH.Clearnet.
So far, BNP Paribas, Credit Suisse, Goldman Sachs , HSBC, JP Morgan Securities, Nomura International and The Royal Bank of Scotland have all traded CME’s interest rate swaps. Citibank, Morgan Stanley, and UBS will begin trading soon.
Paul Twohey, the European head of OTC clearing for Credit Suisse told Reuters how CME’s new development enables dealers to have an “increased choice of venues at which to clear their OTC positions in line with regulatory requirements.”
The Wall Street Journal reports that an expansion of OTC currency derivatives and credit default swaps for CME’s London-based clearing house is set for later this year. The group will aslo develop clearing services for CME Europe, the newest exchange, which is currently schedule to begin operations with 30 forex futures and options by the second quarter.