The NASDAQ OMX Group, Inc. (Nasdaq:NDAQ) announced today the completion of its 80% equity investment in the International Derivatives Clearing Group (IDCG). Effective today, IDCG will become an independently operated subsidiary of NASDAQ OMX. Additionally, today the Commodity Futures Trading Commission (CFTC) granted IDCG approval to clear OTC Interest Rate Swap (IRS) Futures Contracts and other Fixed Income derivatives contracts.
With CFTC approval, IDCG plans to launch central counterparty clearing for IRS products. IDCG's subsidiary, International Derivatives Clearinghouse, LLC, will be the clearinghouse with U.S. regulatory oversight using NASDAQ OMX SECUR XT for clearing. The Philadelphia Board of Trade (PBOT), a recently acquired subsidiary of NASDAQ OMX, will be serving as the designated contract market (DCM) for the Interest Rate Swap Products using NASDAQ OMX Click XT technology for matching.
Bob Greifeld, Chief Executive of Officer said, "NASDAQ OMX has been an early advocate for reform of the Over-the-Counter market where bilateral contracts have contributed to the current credit crisis. It is our belief that basic market mechanisms such as central counterparty clearing systems can reduce credit risk while increasing the efficient use of capital."
"Our decision to enter this market was influenced by the idea of creating an innovative futures contract that mirrors an OTC IRS market that is over $300 trillion in size. We would also like to commend the CFTC for their leadership throughout this approval process," Greifeld added.
Chris Concannon, Executive Vice President of NASDAQ OMX said, "The completion of our investment today furthers NASDAQ OMX's entrance into the derivatives market while leveraging our assets from both the OMX Group and PHLX acquisition. By partnering with IDCG we are creating a highly efficient market to trade, clear and settle U.S. Dollar interest rate swap futures. The dynamic and experienced IDCG team has successfully built a timely and truly unique product offering."
IDCG's management team includes Vincent Viola as Chairman, Chris Edmonds, who serves as Chief Executive Officer, and John Shay, who serves as Chief Marketing Officer. IDCG plans to launch the platform in the near future.
