NEW YORK, Dec. 22, 2008 (GLOBE NEWSWIRE) -- International Derivatives Clearing Group, LLC (IDCG) announced today that the Commodity Futures Trading Commission (CFTC) has approved its application as a derivatives clearing organization (DCO). The application was filed on August 25, 2008. This approval paves the way for IDCG's clearinghouse to begin clearing OTC Interest Rate Swap Contracts before the end of 2008.
The IDCG clearinghouse is a central counter-party providing real-time credit mitigation for over-the-counter (OTC) interest rate swap products. IDCG plans to open the clearinghouse for its members and customers before the end of this year. This scheduled opening will provide a number of counterparties the ability to novate existing positions into the clearinghouse and receive immediate capital efficiency benefits and the elimination of counterparty credit risk.
Vincent Viola, Founder and IDCG Board Chairman, said, "The systemic issues facing the interest rate swap market is analogous to the issues faced by the energy markets in the earlier part of this decade. The time is right and the macro-market is ready for this innovation just as the energy swap market embraced Clearport in 2002." In addition, Mr. Viola stated, "I commend the staff and the leadership of the CFTC for recognizing the importance of this unique product offering in this unprecedented time."
NASDAQ OMX owned Philadelphia Board of Trade (PBOT) will serve as the designated contract market (DCM) for these products while IDCG will act as clearinghouse. IDCG will use the "exchange futures for swaps" (EFS) mechanism to accept consummated transactions from a number of independent execution venues. EFS is a common regulatory supported process which allows the current trading practices to remain unchanged and decreases the associated risk of such transactions. Since these instruments are cleared as futures, the benefits include eliminating the capital requirements of held swap positions and replacing them with margin requirements, favorable futures tax treatment, and the protection of customer segregated funds.
Christopher Edmonds, IDCG's CEO, notes, "We have seen a significant interest among both buy-side and sell-side participants in the last few weeks. We are eager to deliver a clearinghouse and a risk management system that is fungible with the OTC interest rate swap market."
Edmonds and others at IDCG have told policy makers over the last several months that IDCG sees this effort as part of a private sector response and partial solution to macro-economic problems facing the credit markets. Founder and Chief Marketing Officer, John Shay, counts the number of clearing participants who have already committed to clear OTC Interest Rate Swap Contracts as a testament that the market place will welcome this offering.
About the International Derivatives Clearing Group
The International Derivatives Clearing Group (IDCG) is an independently operated subsidiary of NASDAQ OMX Group. IDCG will operate a CFTC regulated clearinghouse that will be a central counterparty to OTC interest rate swap contracts and other fixed income derivatives. IDCG, in conjunction with IT&e's Razor technology, will utilize NASDAQ OMX Click XT matching and NASDAQ OMX SECUR clearing technology to provide an efficient and transparent forum to clear and settle OTC products. For more information about IDCG, visit http://www.idcg.com.
About the NASDAQ OMX Group
The NASDAQ OMX Group, Inc. is the world's largest exchange company. It delivers trading, exchange technology and public company services across six continents, with over 3,900 listed companies. NASDAQ OMX Group offers multiple capital raising solutions to companies around the globe, including its U.S. listings market; NASDAQ OMX Nordic, NASDAQ OMX Baltic, including First North; and the U.S. 144A sector. The company offers trading across multiple asset classes, including equities, derivatives, debt, commodities, structured products and ETFs. NASDAQ OMX Group technology supports the operations of over 70 exchanges, clearing organizations and central securities depositories in more than 50 countries. NASDAQ OMX Nordic and NASDAQ OMX Baltic are not legal entities but describe the common offering from NASDAQ OMX Group exchanges in Helsinki, Copenhagen, Stockholm, Iceland, Tallinn, Riga, and Vilnius. For more information about NASDAQ OMX, visit http://www.nasdaqomx.com.