| LONDON, March 18
LONDON, March 18 Nasdaq OMX has kicked
off Europe's next phase in making financial derivatives safer by
becoming the first clearing house to be authorised under new
European Union rules.
Derivatives, such as credit default swaps, were at the heart
of the 2007-09 financial crisis and their opacity deepened the
woes of Lehman Brothers, the U.S. bank that collapsed in 2008.
World leaders agreed the following year that to increase
transparency in the $700 trillion sector, contracts should be
reported - which began last month in the EU - centrally cleared
and traded on electronic platforms.
A clearing house is backed by default funds to ensure a
trade is completed even if one side goes bust.
Now that the first clearing house has been authorised under
the new reforms, it starts a clock for the European Securities
and Markets Authority or ESMA, an EU watchdog, to decide which
types of derivatives contracts must be cleared across the
"This is now the kick-off for the central clearing
obligation. Probably the earliest possible date for mandatory
clearing to start is by the end of this year," ESMA spokesman
Reemt Seibel said.
More than 20 clearing houses have applied for authorisation
under the EU derivatives law.
Hans-Ole Jochumsen, an executive vice president at Nasdaq
OMX, expects some assets like certain currency derivatives to be
cleared even if ESMA decides that clearing should not be
"There is a growing feeling in some banks that probably it
would be good to have a more transparent set up to avoid any
regulatory compliance risks," Jochumsen told Reuters.
In other assets, such as commodities, capital requirements
to cover contracts that are cleared will be lower than for
uncleared contracts, giving a financial incentive to clear.
"We are in very close dialogue with a number of European
banks about whether we can clear over-the-counter equity based
products," Jochumsen said.
Nasdaq OMX is already the fourth largest derivatives
clearing house in Europe and clears equity, interest rate and
commodity derviatves. It faces competition from rivals such as
Eurex Clearing and LCH.Clearnet and ICE Clear