* Financial Services Authority approves launch
* Venture challenges LCH.Clearnet
* Major firms already trading
CHICAGO, March 18 CME Group Inc has
launched a clearing service for interest rate swaps in London,
just one week after U.S. regulators began to phase in long
anticipated mandates for rate swap clearing on CME's home turf,
the exchange operator said on Monday.
The U.S. exchange operator's London-based CME Clearing
Europe won approval from the U.K.'s Financial Services Authority
for its first foray into clearing over-the-counter (OTC)
financial derivatives. It has been clearing energy swaps in
London for about two years.
The venture challenges LCH.Clearnet, which clears 90 percent
of bank-to-bank interest rate swaps and has been expanding in
the United States. The London Stock Exchange is buying
BNP Paribas, Credit Suisse, Goldman Sachs
, HSBC, JP Morgan Securities, Nomura
International and The Royal Bank of Scotland have traded
CME's interest rate swaps so far, CME said. Citibank, Morgan
Stanley and UBS will begin trading "in the
coming weeks," according to the exchange operator.
CME's launch offers dealers an "increased choice of venues
at which to clear their OTC positions in line with regulatory
requirements," said Paul Twohey, European head of OTC clearing
for Credit Suisse.
CME launched OTC interest rate swaps for seven currencies.
It comes a week after U.S. regulators began phasing in
mandates for rate swap clearing, rules that result from the 2010
Dodd-Frank legislative overhaul of Wall Street.
Starting on March 11, hedge funds and other large investors
had to start guiding their trading in derivatives through
"The expansion into IRS clearing deepens our offering,
providing access to financial derivative clearing through our
European platform, accommodating a broad base of international
customers," said Andrew Lamb, chief executive officer of CME
CME said it plans to launch over-the-counter foreign
exchange and credit default swaps in London later this year.