Liffe, NYSE Euronexts London-based futures trading subsidiary, today became the first exchange to clear over-the-counter credit default swaps contracts, said Eric Ryan, a NYSE Euronext spokesman.
The contracts are negotiated and agreed away from the exchange before being processed through (Liffes) Bclear and cleared through LCH-Clearnet, Mr. Ryan said.
Several other exchanges have announced plans to clear the OTC derivatives, which are seen as a potential hub of systemic risk amid the worsening economy and rising default risk. However, Liffe, like its competitors, is clearing at first only the safest CDS contracts, based on the Markit iTraxx Europe, Crossover and Hi-Vol indexes.
Separately, Nasdaq OMX Group today said its subsidiary International Derivatives Clearing Group has been approved as a U.S. clearinghouse by the CFTC. This approval paves the way for IDCGs clearinghouse to begin clearing OTC interest-rate swap contracts before the end of 2008, said Nasdaq spokeswoman Silvia Davi. Nasdaq owns the Philadelphia Board of Trade, a small futures market.