First OTC Derivatives Player to Launch Central Counterparty Clearing
NEW YORK, Jan. 6, 2009 (GLOBE NEWSWIRE) -- International Derivatives Clearing
Group, LLC (IDCG), a majority owned, independently operated, subsidiary of The
NASDAQ OMX Group, Inc.(sm), today announced the official launch of its
clearinghouse. IDCG began accepting U.S. Dollar denominated Interest Rate Swap
(IRS) Futures contracts for clearing and settlement on December 29, 2008. These
IRS Futures contracts have been cleared by IDCG's wholly owned, Commodity
Futures Trading Commission (CFTC) regulated clearinghouse, International
Derivatives Clearinghouse (IDCH). IDCH was granted a derivatives clearing
organization license (DCO) by the CFTC on December 22nd, 2008.
"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. IDCG has delivered a sophisticated private sector solution
to help mitigate credit risk in a truly unprecedented time. We are proud to
have participated in IDCG's successful launch of its interest rate swap futures
clearing offering," said Bob Greifeld, CEO of NASDAQ OMX.
"We have the right product, the right technology, the right partner with NASDAQ
OMX, and most importantly, we have launched this unique clearing solution at
exactly the right time," said Vincent Viola, IDCG Founder and Chairman.
The OTC interest rate market is the largest derivative asset class in the
world, with an estimated $460 trillion dollars in notional principal
outstanding as of June 2008 according to the Bank for International
Settlements. It is also estimated that over a trillion dollars in notional
principal trades every day. Because interest rate swaps are traded over the
counter, the structure of this market is largely opaque, and participants bear
substantial counterparty credit risk. The use of a centrally cleared platform
for OTC IRS contracts provides an alternative to these problems.
"The marketplace for interest rates swaps is evolving and centralized clearing
will be part of the new landscape. We believe other market participants will
embrace this as we have," said Matt Gelber, CEO of TradeLink, an IDCG market
participant.
"We built our systems and operations, filed our CFTC application, collected
customer commitments, received regulatory approval and began clearing IRS
contracts all in 2008. This expedited timeline reflects the absolute commitment
our team has as well as the market demand for a private sector solution to the
current credit market turmoil," said Chris Edmonds, IDCG CEO.
NASDAQ OMX Group(sm) subsidiary, the Philadelphia Board of Trade (PBOT), is the
designated contract market (DCM) licensed to list the futures contracts cleared
by IDCH. IRS futures may be traded either through an Exchange of Futures for
Swaps (EFS) process via Swapdrop.com for existing interest rate swaps, or by
entering orders into the IDEX XT matching platform. The two trading modalities
provide significant advantages for market participants.
Market participants who use the EFS process to convert their OTC interest rate
swaps to cleared IRS futures through IDCH reduce bilateral counterparty credit
risk and simplify the ongoing processes required to manage such relationships.
The substitution of bilateral counterparty credit risk with a regulated
clearinghouse enables a much greater number of market participants to interact
with one another with greater confidence.
Additional potential benefits to centrally clearing IRS futures contracts
through IDCH include:
* Standardized valuations for cleared IRS futures contracts
* Contracts are margined in a transparent, standardized process
* IDCH cleared contracts may qualify for 60/40 tax treatment, similar
to other futures contracts
* Reduction to capital reserves required for bilaterally settled OTC
derivative contracts, synthetically increasing market participants'
available free capital
IDCH is offering clearing services for new and existing OTC IRS contracts after
conversion to IRS futures contracts with maturities up to 30 years.
About the International Derivatives Clearing Group
The International Derivatives Clearing Group (IDCG) is an independently
operated subsidiary of NASDAQ OMX Group. IDCG will operate International
Derivatives Clearinghouse (IDCH), a CFTC regulated clearinghouse that will be a
central counterparty to interest rate swap futures contracts and other fixed
income derivatives. IDCH, 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 futures
products. For more information about IDCG and IDCH, visit www.IDCG.com.
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 companies. NASDAQ OMX offers multiple capital raising solutions
to companies around the globe, including its U.S. listings market; the OMX
Nordic Exchange, including First North; and the 144A PORTAL Market. The company
offers trading across multiple asset classes including equities, derivatives,
debt, commodities, structured products and ETFs. NASDAQ OMX technology supports
the operations of over 70 exchanges, clearing organizations and central
securities depositories in more than 50 countries. OMX Nordic Exchange is not a
legal entity but describes the common offering from NASDAQ OMX exchanges in
Helsinki, Copenhagen, Stockholm, Iceland, Tallinn, Riga, and Vilnius. For more
information about NASDAQ OMX, visit www.nasdaqomx.com.
Cautionary Note Regarding Forward-Looking Statements
The matters described herein contain forward-looking statements that are made
under the Safe Harbor provisions of the Private Securities Litigation Reform
Act of 1995. These statements include, but are not limited to, statements about
IDCH, PBOT, NASDAQ OMX and their products and services. Actual results may
differ materially from those expressed or implied in the forward-looking
statements. Forward-looking statements involve a number of risks, uncertainties
or other factors beyond IDCH's, PBOT's and NASDAQ OMX's control. These factors
include but are not limited to factors detailed in NASDAQ OMX group annual
report on form 10-k and periodic reports filed with the Securities and Exchange
Commission. We undertake no obligation to release any revisions to any
forward-looking statements.
CONTACT: International Derivatives Clearing Group, LLC (IDCG)
Media Contact:
Alan Sobba
(646) 867-2535
alan.sobba@idcg.com
Media Contact:
NASDAQ OMX
Silvia Davi
(646) 441-5014
silvia.davi@nasdaqomx.com
IDCG Launches Clearinghouse for OTC Interest Rate Swaps
| Source: The NASDAQ OMX Group, Inc.