State Street Global Markets has joined CME Group for clearing of over-the-counter interest rate swaps, effective 24 August 2012.
The Dodd-Frank Act in the US and similar measures in Europe mandate centralised trading and clearing to increase transparency and help reduce risk in OTC derivatives markets. State Street’s membership in CME Group expands the clearing options available to clients amid this changing regulatory environment.
“As derivative markets evolve, State Street’s membership provides buy-side clients with a new, neutral model for trading, clearing and processing of their swap positions,” says Cliff Lewis (pictured), executive vice president and head of State Street’s eExchange business. “Joining CME Group, one of the world’s leading derivatives marketplaces, is an important step towards offering a fully comprehensive, end-to-end derivatives solution for our clients.”
CME Group membership is the latest move by State Street to prepare for the new regulatory regime for OTC derivatives. In 2011, State Street announced its intention to expand its futures commission merchant services to cover swap clearing capabilities and announced DerivOneSM, its end-to-end derivatives servicing offering. In 2012, State Street launched SwapEx, an execution platform for the trading of derivatives products. Together, these services are designed to reduce operational risk through the automation of the many stages of derivatives processing, including execution, clearing, collateral management, cash and securities flow between the middle and back offices, transaction cost and risk reporting, valuations, and the reconciliation of positions.
“We are pleased that State Street has joined CME as an OTC IRS clearing member,” says Kim Taylor, president, CME Clearing. “As we continue to work with both the buy- and sell-side to identify capital and operational efficiencies for all market participants, we also are very pleased to continue to offer market participants a diverse pool of clearing membership as they transition to central clearing.”