Futures Exchanges Gear Up for OTC

Terry Flanagan

Futures exchanges are building out their clearing and trading infrastructures and boosting connectivity as global OTC regulations kick in.

For market participants trading derivatives in Europe, Emir outlines a set of rules focusing on trade confirmations, trade reporting, clearing and risk management, all of which are likely to come into effect between the summer of 2013 and early 2014.

The key regulatory technical standards (RTS) and implementing technical standards (ITS) of Emir came into force on March 15, 2013.

Reporting to trade repositories is scheduled to become mandatory in the fourth quarter of 2013. The first CCPs will also be authorized in the fourth quarter, while the first clearing obligations will commence in the summer of 2014.

CME Europe, a new London-based futures exchange and wholly owned subsidiary of CME Group, is scheduled to launch September 9, 2013, pending regulatory approval.

CME Europe will deliver connectivity and operational efficiencies to customers through proven CME Group infrastructure like CME Globex and CME ClearPort, as well as the clearing services of CME Clearing Europe, an established London-based clearing house.

Trading Technologies International, Inc. (TT) announced that it has become the first independent software vendor (ISV) to pass conformance, and will provide “day one” access to CME Europe, which will offer trading of FX futures and other products through the CME Globex electronic trading platform.

“As we work our way through the approval process, we are excited at the feedback and input from the marketplace ahead of our launch,” said Robert Ray, CEO of CME Europe. “Having Trading Technologies now ready and able to provide its services for our prospective clients in Europe and Asia on day one is an important step for our upcoming launch.”

Deutsche Börse Group has launched a new architecture for its global IT offering. The “7 Market Technology” series branding scheme supports the Group’s integrated business model and underscores the strategic IT objective to build and operate premium, innovative infrastructure.

At present, the 7 Market Technology series comprises T7 and C7. T7 is the brand for the derivatives trading architecture currently used by Eurex Exchange and the International Securities Exchange.

The C7 clearing infrastructure will be the next-generation clearing system, designed to ensure flexibility for the introduction of new products and services. Eurex Clearing is the lead user with a launch planned for 2014.

IntercontinentalExchange has cleared more than $1 trillion in credit default swap (CDS) gross notional value by buy-side participants since client clearing was launched in December 2009.

ICE worked closely with market participants to prepare for the June 10 CFTC clearing deadline for category 2 firms.

“We appreciate the hard work and cooperation of our clearing members and their clients to prepare for implementation of clearing rules,” said ICE Clear Credit president Christopher Edmonds. “Because of those efforts, and the significant resources and technology ICE has invested in CDS clearing over the past few years, the credit market is ready to meet Dodd-Frank’s goal of reducing systemic risk through clearing.”

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