ICE warms to expanding US clearing model

ICE exploring new direct clearing models for US derivatives.

Intercontinental Exchange (ICE) is currently exploring new direct clearing models for the US derivatives market.

Hester Serafini, chief operating officer for ICE Clear US, told delegates at FIA Expo 2016 that it is looking to replicate its European “Sponsored Principal” model, which allows clients to become a direct counterparty to the clearing house with separate position, margin and asset accounts.

“We had in the past looked to roll out something similar in the US, but at the time the market was not quite ready. That has now changed and we are engaging with clearing members, and working with them to structure the right setup,” said ICE’s Serafini.

“We think it is very critical to get the right balance. On the one hand there is the saving in the capital for clearing members, on the other there is the bankruptcy considerations for the end-users. There is also the relationship between the clearing house and clearing members and we do no want to disintermediate in the process.

Serafini also explained it has to work with banks so that the model does not threaten risk management processes.

On Wednesday’s “Exchange Leaders Panel”, exchange group leaders from CME Group and Deutsche Boerse reaffirmed delegates that is new direct clearing models will not exclude banks from the clearing process.

Serafini also noted it has received increased requests from its clients for clearing credit derivatives off the back of the non-cleared initial margin rules which came into force in September.

Similarly, LCH has seen an increase in voluntary inflation swaps and non-deliverable forwards clearing following the onset of the rules.