Intercontinental Exchange has cemented its position as the front runner in providing central counterparty (CCP) clearing for credit default swaps. In mid-September ICE revealed its US and European clearing houses had cleared more than 30,000 contracts worth $2.45tr. It also announced that BNP Paribas had joined as its 13th member in the US.
However, ICE’s chief European rival, Eurex, insisted that the race for CDS clearing was far from over.
ICE Trust US had cleared 24,000 contracts with a notional value of $2tr since launching in March, while ICE Clear Europe had processed 6,000 transactions totalling Eu313bn ($447bn) since its launch in July.
ICE Trust and ICE Clear Europe offer for clearing 20 North American CDX index contracts and 12 European iTraxx contracts, respectively. The exchange expects to begin clearing single name CDS contracts soon.
In North America, ICE still has no active rival – CME intends to clear CDS but has not begun doing so.
Meanwhile, by early September Eurex had processed just 10 European transactions since its inception at the end of July, worth a total of Eu90m. Unlike ICE, Eurex has cleared four single name CDS transactions as well as index deals.
Despite ICE’s apparent dominance, John Gammer, vice-president and head of clearing sales at Eurex, said the battle for supremacy was far from over.
“I think it’s far too early to say who is going to win that race,” he argued, in response to suggestions that ICE’s early lead meant victory was all but accomplished.
Some market participants have suggested that ICE was the favourite to emerge as the dominant CDS clearing house, on both sides of the Atlantic, because it had successfully lured the leading CDS dealers to clear trades through its system.
However, Brendan Bradley, global head of product strategy at Eurex, rejected the notion that the “major broker-dealers” had chosen ICE as their preferred solution.
He said 14 market participants were readying themselves to clear CDS contracts at Eurex, and that it was likely the big dealers would be active on more than just ICE’s offering.
Eurex, which has said it would offer up to 90% of the equity in the CDS clearing platform to market participants, said dialogue with interested parties was continuing but would not reveal their identities.