CME Group will clear OTC forex

CHICAGO, May 16, 2011 /PRNewswire/ -- CME Group, the world's leading and most diverse derivatives marketplace, today announced the launch of post-execution clearing services for over-the-counter (OTC) U.S. dollar/Chilean peso non-deliverable forwards (NDFs) through CME ClearPort.

"This is the first step in our broader initiative to provide clearing services for a wide range of FX products later this year," said Craig LeVeille, CME Group's Director of FX Products. "Chile has a strong economy generating large investment exposures to foreign assets. Local institutions can use our clearing service to mitigate the growing credit constraints they face when hedging currency risks, and this should lead to a boost in liquidity and an expansion in cross border activity."

The initial product launch will be for NDF-style transactions for U.S. dollar (USD) versus Chilean peso (CLP), where original trades conducted in the standard "USD/CLP" interbank terms of Chilean peso per U.S. dollar, can be submitted for clearing. This clearing service will benefit from daily valuation curves provided by ICAP, the world's premier interdealer broker and a leading provider of brokerage services to the Latin American FX markets. The key benefits of the offering include:

  • Mitigated counterparty risk - CME ClearPort uses a central counterparty clearing model, which allows the central clearing house to guarantee the performance of every transaction.
  • Expanded liquidity - With these clearing and risk services in place, existing accounts will now have the ability to free-up credit lines.
  • Enhanced operational efficiency - Post-trade clearing and processing with CME ClearPort eliminates significant documentation time. All OTC FX positions sent to CME Clearing will eventually allow for the same powerful cross-margin efficiencies as exchange-traded FX futures and options. Additionally, the availability of daily valuation curves will help counterparties in daily marking and position margining, which may serve as valuable risk mitigation for portfolios of longer-dated risk products.

CME ClearPort is a set of flexible OTC clearing services available to all OTC market participants to significantly mitigate their counterparty credit risk and provide neutral valuations. The open-access, platform-agnostic structure of CME ClearPort means customers have access to a post-execution clearing service that lets you control how, with whom and on what terms you trade – while increasing your security, efficiency and confidence. CME ClearPort has nearly 1,000 products available for clearing across multiple asset classes. There are about 16,000 registered users and average daily volumes are approximately 500,000 contracts.

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