Earlier this week, IntercontinentalExchange bragged that its European clearing unit marked its second week of operations by clearing 699 transactions with a notional value of €31.9bn. The exchange’s US clearing unit, ICE Trust, processed more than $1,700bn North American CDS indices.
In all, not a bad show – and especially interesting in light of the decision by rival NYSE Liffe to abandon its own European clearing intiatives. The FT reported in July that NYSE Liffe had placed its BClear project – launched last December – “under review” after it had failed to clear a single contract.
At the time, the FT said “it had become clear to some participants that CDS clearing was not as commercially attractive as had been thought six months ago.”
Clearly not to Liffe, anyway, as Risk reported on Wednesday the exchange officially threw in the towel at the end of July:
10 August – Derivatives exchange NYSE Liffe and London-based clearing house LCH.Clearnet have shelved their central clearing service for credit default swaps (CDS), having processed no trades since it was launched in December last year.
The exchange officially suspended the CDS contracts offered for clearing (series 8, 9 and 10 of the Markit iTraxx Europe investment grade, Crossover and Hi-Vol CDS indexes) on July 29 following a month-long review of the service.
An official at the exchange told Risk Liffe would consider venturing into the CDS market again, but declined to elaborate.
Unlike Liffe, although with not quite the same level of success as ICE, the other player in the European market – Eurex – has also managed to attract interest. Frankfurt-based Eurex launched its platform at the end of July, and has cleared two trades worth a combined €75m.
Related links:
The Trading Room – FT
European Commission welcomes first CDS trades – FT
The pricing-clearing link in the CDS market – FT Alphaville