Newedge clears first OTC IRS swap on Chicago Mercantile Exchange
Multi-asset brokerage and clearing specialist Newedge has cleared its first OTC interest rate swap (IRS) contract.
The transaction is also the first to be cleared on CME Clearing by a non-traditional OTC swap dealer.
The clearing process is supported with a default management agreement between Newedge, a futures commission merchant member of CME, and its two bank shareholders – Societe Generale CIB and Crédit Agricole CIB.
Nicolas Breteau (pictured), chief executive at Newedge, says: “Driven by new regulation, the market for OTC clearing is transforming. Such change provides a real opportunity for us as an agency broker to leverage our expertise in clearing of exchange-traded derivatives and OTC commodity swaps, expand our offering, and add value for clients.”
"We are pleased that Newedge has cleared their first client IRS trade with CME Clearing," says Kim Taylor, president of CME Clearing. "We continue to work with both the buy- and sell-side, including FCMs such as Newedge, to identify capital and operational efficiencies that ease their transition to central clearing.”
Newedge’s expansion is in response to regulatory changes – principally the Dodd-Frank Act and European Market Infrastructure Regulations – to the USD441trn IRS market that are paving the way for a shift in the bilateral OTC market. The aim is to increase central counterparty clearing (CCP), drive greater transparency, and reduce counterparty risk for the benefit of end customers.
A partnership between Societe Generale Corporate & Investment Banking (SG CIB) and Crédit Agricole Corporate and Investment Bank (CACIB) supports Newedge’s OTC Clearing initiative. Newedge’s IRS clearing platform is accessible to SG CIB and CACIB’s customers seeking a central counterparty clearing solution.
Newedge is an established participant in cleared OTC commodity swaps through CME ClearPort, ICE Clear Europe and SGX AsiaClear. The firm also expects to evaluate and participate as clearing broker in additional OTC central counterparty clearing venues as well as other asset classes.
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