CDS Central Clearing Platforms Approved by Regulators

Regulators approved in late December a proposal from NYSE Euronext Liffe and a separate proposal from CME Group and Citadel Investment Group to provide centralized clearing of credit default swaps, setting the stage for competition between the clearing solutions.

The approvals follow a tumultuous year in the financial markets that saw the collapses of Bear Stearns in March and Lehman Brothers in September, which raised fears over global systemic risk in the credit derivatives markets fueled by counterparty exposure. Regulators pressed the industry to set up a centralized clearing facility for CDSs to mitigate counterparty risk, setting a deadline of Dec. 31, 2008.

CDS Central Clearing Platforms Approved by Regulators