Europe’s largest asset manager, Amundi, has joined LCH as the first buy-side clearing member for credit default swaps (CDS), a move which some experts say could revive trading and bring back market makers.
Amundi has gone live on CDSClear via its clearing broker BNP Paribas, giving it access to LCH’s portfolio margining service for correlated CDS contracts.
“Risk management is a top priority for us and our investors, and by clearing through LCH we are able to benefit from an experienced and robust CCP, that proved instrumental in accompanying us on mandatory clearing,” said Emmanuel Gaffet, head of dealing risk management, Amundi.
Buy-side firms have recently stepped up their demands for mandatory clearing of single-name CDS in a bid to revive liquidity and bring market makers back to the once widely traded market.
In December 2014, 25 buy-side firms pledged to begin voluntary clearing of single-name CDS, including BlackRock, BlueMountain Capital Management, Citadel, Eaton Vance and PIMCO.
By adding transparency around pricing of single-name CDS through clearing, this would increase confidence in the market, the firms claimed.
“This launch is an important development for us and the industry as it gives buy-side firms more choice of where to clear their CDS contracts, following the introduction of the non-cleared margin requirements and credit clearing mandate in Europe,” added Raphael Masgnaux, global head of prime solutions & financing, BNP Paribas.
From the second quarter of this year, buy-side firms trading CDS will be able to connect directly to LCH.SA through two additional clearing brokers, enabling a larger number of end-users to gain access to clearing and capital efficiencies.