IntercontinentalExchange (NYSE: ICE), a leading operator of regulated global futures exchanges, clearing houses and over-the-counter (OTC) markets, today marked the one-year anniversary of the launch of ICE Trust U.S. (ICE Trust), the world's leading clearing house for credit default swaps (CDS).
ICE Trust began clearing North American CDS indexes (CDX) on March 9, 2009. Through March 5, 2010, ICE Trust cleared $4.3 trillion in gross notional value on more than 55 thousand transactions, covering 31 CDS indexes and 29 single-name reference entities. Open interest stands at $285 billion, a compression rate of more than 90% of ICE Trust's CDS volume.
"Clearing is an important step in the evolution of the credit derivatives market," said ICE Trust President Chris Edmonds. "With a significant amount of outstanding CDS cleared in its first year, ICE Trust has substantially increased the stability and transparency of the CDS market and contributed to the reduction of systemic risk."
"ICE Trust owes its success to the hard work and collaboration of market participants, regulators and colleagues across our company," said Jeffrey C. Sprecher, ICE Chairman and CEO. "I am grateful for their dedication, and we remain committed to expanding our successful suite of CDS services and capabilities."
ICE acquired Creditex, a credit derivatives industry leader in August 2008. Creditex's innovations include electronic CDS trading, credit event auctions and ICE Link, the CDS industry's leading affirmation and post-trade processing platform. ICE Link is connected to the major CDS dealers and over 400 buy-side firms, with links between CDS market participants, the DTCC Trade Information Warehouse and the ICE Trust and ICE Clear Europe CDS clearing houses. On March 6, 2009, ICE completed its acquisition of The Clearing Corporation (TCC), which provides the risk management framework, operational processes and clearing infrastructure for ICE's CDS clearing houses. ICE Trust launched its first clearing cycle with 10 clearing members. Today, the clearing house has 13 clearing members and 10 active buy-side firms.
On December 14, ICE Trust began clearing CDS indexes for buy-side market participants. ICE's buy-side solution offers trade-date clearing, segregation of customer funds and position and margin portability. To date, buy-side transactions cleared by ICE Trust totaled $345 million in gross notional value. Also in December, ICE Trust became the first clearing house in North America to clear single-name CDS. Through March 5, ICE Trust members cleared $48 billion in gross notional value of single-name CDS transactions. ICE Trust expects to introduce buy-side clearing of single-name CDS in the second quarter of 2010.
In addition to clearing North American CDS through ICE Trust, ICE began clearing European CDS through its London-based clearing house, ICE Clear Europe, in July 2008.
ICE CDS Clearing Year One Achievements and Key Data
- Development of technology and clearing infrastructure, combining CDS trading with the added protections afforded by a central clearing house -- all within the existing CDS market workflow.
- Creation and stress testing of a CDS-specific risk model and risk management methodology, including a pricing algorithm based on a daily auction process with executable prices.
- Advancement of a sound segregation and portability model designed to work with existing bankruptcy law to protect clients funds in the event of a default.
- Establishment of the world's only dedicated CDS guaranty fund, with cash exceeding $3 billion as of December 31, 2009.
- Cleared in aggregate $6.4 trillion in gross notional globally since March 2009.
Key Next Steps for First Half of 2010
- Increase single-name CDS coverage by mid May to 85% and 60% of iTraxx and CDX constituents, respectively.
- Begin clearing select sovereign CDS through ICE Clear Europe.
- Provide enhanced risk and pricing tools for clearing participants and members.
- Launch buy-side clearing in Europe.
- Backload buy-side positions for single-name CDS in both North America and Europe.
ICE CDS Clearing Timeline
- March 9, 2009: ICE Trust begins clearing North American CDS indexes (CDX), with $7.1 billion in gross notional value in its first weekly clearing cycle.
- June 12, 2009: ICE Trust surpasses $1 trillion in gross notional value cleared
- July 27, 2009: ICE Clear Europe begins clearing indexes (iTraxx).
- September 11, 2009: ICE Trust surpasses $2 trillion in gross notional value cleared.
- December 4, 2009: ICE Trust surpasses $3 trillion in gross notional value cleared.
- December 14, 2009: ICE Trust begins clearing buy-side CDX transactions.
- December 14, 2009: ICE Clear Europe begins clearing single-names.
- December 21, 2009: ICE Trust begins clearing single-names.
- January 22, 2010: ICE CDS clearing reaches $5 trillion on a global basis; ICE Clear Europe CDS clearing crosses euro 1 trillion.
- February 19, 2010: ICE CDS clearing surpasses $6 trillion on a global basis; ICE Trust reaches $4 trillion in gross notional value.
Additional information about ICE Trust and ICE Clear Europe CDS clearing is available at https://www.theice.com/ice_trust.jhtml and https://www.theice.com/clear_europe_cds.jhtml
