Newedge, the Chicago and London-based multiasset brokerage and clearing firm, has been approved for membership to clear over-the-counter interest rate swaps at the Chicago Mercantile Exchange, the firm announced today.
Obtaining authorization positions Newedge as the first futures commission merchant (FCM) and non-traditional OTC IRS swap dealer to offer central counterparty clearing of OTC interest rate derivatives, the company said.
“Change inevitably breeds opportunity,” said Newedge CEO Nicolas Breteau in today’s release. “The developing regulatory agenda has created the opening for Newedge to bring our world-class listed derivatives and OTC commodity swaps clearing expertise to the OTC IRS space. Membership of the CME is another important step forward towards fully realizing this opportunity,” continued Breteau.
“We are pleased to welcome Newedge as an OTC IRS clearing member of CME,” said Kim Taylor, President, CME Clearing, in the same release. “We strive to offer market participants a diverse pool of clearing membership, and we are focused on continuing to work with both the buy and sell-sides to provide capital and operational efficiencies to all market participants as they transition to central clearing.”
To prepare for OTC clearing of IRS, Newedge has been strengthening its technology platform. “Strengthening our global platform, sharing our know-how, and offering true impartiality born of our independence, mean that we are well placed to help clients benefit from reduced counterparty risk, default protection, and capital efficiencies from cross-margining opportunities," added Newedge’s CEO Breateau.
[For more on how Newedge’s CIO Stephen Davy is differenitating the firm’s global clearing and execution business, see Ivy Schmerken’s related story in Gold Book 2012.]
The move by Newedge follows regulatory changes to the $441 trillion IRS market, in which Dodd Frank in the U.S. and the European Markets Infrastructure Regulations (EMIR) are paving the way for a shift in the bilateral OTC market towards increased central counterparty clearing (CCP), more transparency and reduced counterparty risk for end customers, noted the release.
Newedge’s IRS clearing initiative is supported by a partnership with Societe Generale Corporate & Investment Banking (SG CIB) and Credit Agricole Corporate and Investment Bank. Newedge’s OTC IRS clearing platform will be accessible to SG CIB and CACIB’s customers seeking an OTC IRS clearing solution.
Newedge is already an established participant in cleared OTC commodity swaps through CME ClearPort, ICE Clear Europe and SGX AsiaClear. The firm said it expects to evaluate and participate as a clearing broker in additional OTC CCP venues.