CME to Extend Corporate Debt Collateral to Rate Swaps Next Month
February 10, 2012, 12:10 PM ESTBy Matthew Leising
Feb. 9 (Bloomberg) -- CME Group Inc., owner of the world’s largest futures market, will extend the use of corporate debt it accepts as collateral to interest-rate swaps beginning March 12.
While the Chicago-based company’s clearinghouse already accepts corporate bonds to back futures trades, it will now allow users to post as much as $3 billion in bonds to back rate swaps, said a notice sent to customers yesterday. The bonds will need at least an A rating from a nationally recognized statistical rating organization and be denominated in dollars, among other requirements, CME Group said on its website.
U.S. and European regulators are forcing thousands of over-the-counter derivatives users to clear their trades after the $708 trillion market contributed to the financial crisis. Investors in the interest-rate swaps market, the largest OTC derivative asset class, may need at least $1.4 trillion in new collateral payments under the U.S. Dodd-Frank Act, the research firm Tabb Group said in a report last year.
LCH.Clearnet Ltd., the largest interest-rate swap clearinghouse, said in October it may accept corporate bonds for the first time to meet an anticipated surge in demand for a broader array of collateral.
CME Group cleared a record amount of interest-rate and credit-default swaps yesterday, Michael Shore, a spokesman, said in an e-mail message. The company guaranteed about $13.2 billion of the trades, surpassing the prior daily record of $12.9 billion set Nov. 23, he said.
--Editors: Dennis Fitzgerald, Shannon D. Harrington
To contact the reporter on this story: Matthew Leising in New York at mleising@bloomberg.net.
To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net
