ETF News

Nasdaq arm now clearing interest rate contracts

NEW YORK, Jan 6 (Reuters) - Nasdaq OMX's NDAQ.O clearinghouse for interest rate derivatives began processing contracts Dec. 29 and is now looking for partners in the venture, the exchange operator said on Tuesday.

Nasdaq last month bought an 80 percent stake in the International Derivatives Clearing Group, or IDCG. At the same time, IDCG received regulatory approval to clear and settle swaps based on U.S. dollar interest rate futures. See: [ID:nN22499265]

A Nasdaq spokeswoman said the company wants to sell equity stakes in the clearinghouse, which acts as a central counterparty to those buying and selling the contracts.

“By completing its first trade in 2008, IDCG has become the clear leader in delivering central counterparty clearing to the massive over-the-counter derivatives market,” Nasdaq Chief Executive Robert Greifeld said in a statement.

Worth about $357 trillion, interest rate contracts represented 52 percent of total over-the-counter markets worldwide at the end of June, according to the Bank of International Settlements.

With some regulators blaming the private nature of the OTC market -- where participants face each other directly in trades -- for the current credit crisis, exchange operators see this as an opportunity to win new business.

New York-based Nasdaq, which runs the Nasdaq Stock Market, said its so-called International Derivatives Clearinghouse will “help mitigate credit risk in a truly unprecedented time.”

Chicago-based derivatives exchange CME Group Inc CME.O and London-based clearinghouse LCH.Clearnet also run trading or clearing platforms for interest rate swaps. LCH.Clearnet agreed in October to be bought by U.S. equity clearinghouse Depository Trust & Clearing Corp. (Reporting by Jonathan Spicer; editing by John Wallace)