The Japan Securities Clearing Corporation (JSCC) has started clearing yen-denominated interest rate swaps (IRS). Since 9 October, the cross-market clearing organisation, has added the swaps – which are the third most heavily traded IRS behind US dollar and euro – to the list of OTC derivatives it currently clears.
The move makes the JSCC the first clearer in Asia-Pacific to clear yen-denominated IRSs, and through direct participation from 21 IRS market participants – both domestic and international at the initial launch – JSCC has the largest membership of any OTC derivatives clearing firm in the region.
As well as clearing services for exchange-traded transactions, proprietary trading system transactions, and CDS transactions in the OTC derivatives market, JSCC believes the launch of IRS clearing will further improve ease, efficiency and security of financial transactions.
Since the 2008 financial crisis, the safety and transparency of OTC derivatives transactions has been in sharp focus and the subject of G-20-endorsed legislation – such as Dodd-Frank in the US and the European market infrastructure regulation in Europe – to trade and clear a greater portion of the instruments on-exchange and through central counterparties.
In Japan, the Financial Instruments and Exchange Act was amended in May 2010 so that OTC derivative transactions which meet certain criteria will be subject to mandatory clearing from November 2012.
Yen-denominated IRS transactions account for about ¥6.2 trillion per day (as of April, 2010).