CME Group Inc., the world's largest and most diverse derivatives exchange, today announced the launch of clearing services for over the counter (OTC) London gold forwards. Clearing services will be available through CME ClearPort((R)), a set of flexible clearing services open to OTC market participants to substantially mitigate counterparty risk and provide capital efficiencies across asset classes. Clearing services for house business will commence on August 23 for trade date August 24, with customer segregated activity following within 90 days of commencement. These contracts are made available for clearing on COMEX through CME ClearPort, and are subject to COMEX and CME rules and regulations.
"Launching our clearing services for London gold forwards is in direct response to customers' need for a secure way to manage counterparty credit exposure," said Joe Raia, CME Group managing director of energy and metals products. "This post-trade service allows trades to be privately negotiated and executed off-exchange and then submitted through CME ClearPort for clearing. This allows counterparties to continue to trade as they always have while transferring credit risk to CME Group."
"Counterparty credit concerns stemming from the global credit crisis have acted as a constraining influence on financial markets," said Barry Wainstein, Vice Chairman and Deputy Head, Global Capital Markets and Global Head of Foreign Exchange and Precious Metals at Scotia Capital. "Introducing centrally cleared products, such as the London Gold forwards, will assist in returning normalcy to the markets by mitigating counterparty credit risk."
CME Clearing will provide post-trade clearing services for physically delivered OTC London gold forwards. The positions will remain as forwards to the date in clearing and settle with 'London Good Delivery' gold via the market standard book-entry transfer system. Positions will be marked-to-market daily with margins applied to open positions. CME Clearing will remain in the delivery process throughout settlement and ensure transfer of gold and dollars between counterparties.
CME ClearPort continues to provide solutions for more efficient capital allocation with multilateral netting and cross-margining; the protection of segregated customer funds and approximately $8 billion in financial safeguards; neutral, independent valuations for accurate settlement prices; operational efficiencies from straight-through processing, real-time trade confirmations and a standard messaging protocol; and instant access to a diverse mix of clearing services across asset classes.
