CME targets Q1 2017 for buy-side clearing membership launch

The new membership category will allow buy-side clients to directly deposit cash collateral with the CCP.

CME Group is aiming to launch its new direct clearing membership model in the first quarter of 2017, following a delay of approval from the US derivatives regulator.

Its proposal for the new direct funding participant category of clearing membership will allow buy-side clients to directly deposit cash collateral to the clearing house, enabling them to earn interest on cash posted.

The proposal was submitted to the Commodity Futures Trading Commission (CFTC) in mid-July, with the hope that it would be able to launch the scheme in September.

It then re-submitted its proposal in October following certain amendments to the structure of the new membership category, with an intention to become effective at the earliest of 19 December.

In a recent advisory from CME, it stated: “The effectiveness of the proposed rules remains temporarily stayed while CME continues to discuss the program with the relevant regulatory authorities as part of the CFTC’s Rule 40.10 filing process. We look forward to offering direct funding participant clearing membership in 2017.”

CME anticipates launching the service in the first quarter of next year, according the exchange’s website.

Speaking at the FIA Expo conference in Chicago in October the Merc’s CEO, Phupinder Gill, advocated the launch of the new buy-side membership is not a bid to disintermediate banks from the clearing process.

“The FCM community is among the most important component of the financial system, and without their contribution exchanges and clearing houses do not work as efficient,” he said.

“We have neither the want, nor the desire to disintermediate FCMS.”

Earlier this year Eurex launched its direct clearing model, ISA Direct, providing a direct access route for pension funds and insurance companies. ICE is also exploring new clearing models for the US market, and could launch a “Sponsored Principal” type-model.