An interest-rate swaps (IRS) clearing service has been launched in Japan to meet impending regulation for over-the-counter (OTC) derivatives.
The Japan Securities Clearing Corporation (JSCC), will provide clearing services for OTC derivatives, as mandated by the G20, under Japan's Financial Instruments and Exchange Act (FIEA) which has imposed a November deadline for OTC derivatives clearing.
The initiative marks the first yen-denominated IRS clearing service in the Asia-Pacific. Over 5.1 million OTC derivatives transactions were made in Japan in 2011, of which IRSs were a significant proportion.
The JSCC, which is a member of the Tokyo Stock Exchange Group, worked with platform provider Calypso Technology to create the system, following a similar partnership to launch credit default swaps index clearing, which launched in 2011.
Yasushi Suzuki, managing director of JSCC said Calypso’s experience working with global CCPs was instrumental in enabling the clearer to meet the November deadline.
“This milestone allows Japan to further improve the safety and transparency of the OTC market. The advent of OTC derivatives clearing is the first step in the structural reform of the OTC derivatives market,” said Suzuki.
The clearing of OTC derivatives will be mandatory through new regulation coming into force in the US, under the Dodd-Frank Act, and in Europe through the a combination of the European market infrastructure regulation (EMIR) and MiFID II. US regulators are expected to enforce central clearing of derivatives products by the first half of next year, while in Europe, EMIR regulation will come into force from the start of 2013.