U.S. OTC clearing firm to examine Canadian link

NEW YORK & TORONTO--(BUSINESS WIRE)--Canadian Derivatives Clearing Corporation (CDCC) and New York Portfolio Clearing (NYPC) today announced the signing of a Memorandum of Understanding (MOU) to explore the development of a clearing link for the Canadian swap market to assist in meeting Canada’s G20 commitment of clearing over-the-counter (OTC) derivatives by December 31st, 2012. If successful in reaching a final agreement, the resulting structure could serve as an important cross-border template for other jurisdictions around the globe that are required to meet similar G20 obligations.

"Today’s announcement provides a valuable roadmap for building a clearing solution that best meets the needs of the Canadian OTC derivatives market,” stated Glenn Goucher, President and Chief Clearing Officer of CDCC. “NYPC will be a valuable partner as we seek to deliver a viable swaps central counterparty clearing solution for Canada.”

The Canadian OTC derivatives market—approximately C$37 trillion in notional value—is principally transacted through Canada’s six largest banking institutions with a significant number of the counterparties based in the United States or other foreign jurisdictions. The proposed clearing link agreement would foster the development of an effective clearing solution designed to reduce systemic risk and provide Canadian swap market participants and their trading partners with an optimized solution for clearing. The agreement would also seek to maximize capital efficiencies while maintaining the highest global standards for risk management.

NYPC CEO Walt Lukken added: “NYPC is thrilled to collaborate with CDCC as we explore a clearing link for Canada. This MOU is an important first step in our strategic pursuit to bring OTC swaps into the more capital-efficient structure of NYPC.”

Canadian market participants, including the banks, significant buyside institutions, and the Canadian regulatory community have been actively consulting clearing solution providers as they develop the clearing requirements to meet Canadian G20 obligations.

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