Newedge has cleared its first OTC US dollar interest rate swap contract through CME Clearing, as the multi-asset broker accelerates its preparation for the new swaps trading era.
Newedge claims the cleared trade was the first transaction from a ‘non-traditional OTC swap dealer’ – i.e. a firm that is neither a market maker nor prop trading broker dealer – to be passed through CME Clearing.
The broker’s clearing process is supported by a default management agreement between Newedge and its two shareholders Société Générale and Crédit Agricole. Clients of SocGen and Crédit Agricole can also clear swap trades using Newedge’s platform.
Futures brokers like Newedge have the opportunity to expand their businesses to swaps following the introduction of new regulations being implemented across the globe that will push OTC derivatives trades onto exchange-like platforms and through central clearing. Clearing of interest rate swaps and credit derivatives will come into force in the US for some types of market participant on 11 March as part of reforms contained in the Dodd-Frank Act.
Marcus Katz, head of OTC strategy, told theTRADEnews.com that he expects asset managers and hedge funds to trade and clear swaps Newedge.
“We have experience with all these client types from our long standing services of clearing other OTC markets,” he said.
Newedge already clears OTC commodity swaps through CME Clearport, ICE Clear Europe and Singapore Exchange’s AsiaClear facility. The firm will also evaluate opportunities to connect to other central counterparties and expand into other asset classes.
“Driven by new regulation, the market for OTC clearing is transforming,” said Newedge CEO Nicolas Breteau. “Such change provides a real opportunity for us as an agency broker to leverage our expertise in clearing of exchange-traded derivatives and OTC commodity swaps, expand our offering, and add value for clients.