NYSE Euronext to clear CDS, plans big rebates

LONDON Nov 7 (Reuters) - Liffe, the European derivatives arm of transatlantic exchange NYSE Euronext (NYX.N)(NYX.PA), will start clearing credit default swap (CDS) contracts on Dec. 22, and plans to share revenues with participants.

Liffe, which rivals Deutsche Boerse's (DB1Gn.DE) Eurex in delivering a solution for clearing the $55 trillion market, plans to lure market players by sharing as much as 40 percent of its CDS clearing revenue for members that sign up before the launch, people familiar with the matter said.

"Liffe is the first exchange to work with the market by launching CDS contracts rather than credit futures or options, and by allowing business to be pre-negotiated and booked into a secure exchange and clearing house environment," said Garry Jones, executive director of business development and strategy at Liffe.

The European Commission on Wednesday held a meeting with a new working group of industry associations, regulators, insurers and mutual funds for the first time to hammer out a European solution for CDS central clearing and help avoid systematic risks.

EU Internal Market Commissioner Charlie McCreevy wants a clear roadmap on CDS central clearing by the end of this year. [ID:nL5736116]

Liffe will clear CDS contracts based on the iTraxx European indices, which are standardised and easier to move to a central clearing facility.

About 110 participants, including inter-dealer brokers, banks and hedge funds, attended a meeting with Liffe on Wednesday to discuss the CDS clearing facility, which met with a good initial response, said a person who attended the meeting.

Europe accounts for about half of the $55 trillion market and about half of CDS trades are based on indices contracts. (Reporting by Daisy Ku; editing by Simon Jessop)