ICE to compete with CME-Citadel for exchange-traded CDS
NEW YORK, Oct 10 (Reuters) - IntercontinentalExchange Inc (ICE.N) said on Friday it is building its own credit-default swaps platform, setting the stage for a battle for a piece of the exchange-based clearing of CDS with CME Group (CME.O), which announced its own solution with Chicago-based hedge fund Citadel Investment Group earlier this week.
On Friday, the Federal Reserve Bank of New York hosted a meeting about industry progress to create a central counterparty for CDS. The meeting was attended by ICE, as well as by Eurex, the derivatives unit of Deutsche Boerse (DB1Gn.DE), NYSE Euronext (NYX.N), and CME Group and Citadel.
ICE will develop its CDS platform with the futures-clearing operator Clearing Corporation, a dealer-owned clearing house that also clears over-the-counter traded derivatives, Markit Group, a financial information provider, and Risk Metrics, which advises companies on navigating risk.
In June, ICE bought credit derivatives broker Creditex, a member of the Clearing Corporation, for $625 million in a bid to prepare for exchange-based CDS trading.
The collapse of major counterparty Lehman Brothers (LEHMQ.PK) last month brought urgency to the calls for rules to improve transparency and safety, something exchanges argue they can provide. Traditionally, CDS have been traded on over-the-counter markets.
CDS are used to protect against the risk that a borrower will default on its debt, or to speculate about its credit quality. (Reporting by Phil Wahba; Editing by Brian Moss)
