CDS

The Credit Default Swaps (CDS) market is one of the biggest OTC derivatives segments today. CDS contracts represent over $28,888 billion in assets(1).

Regulators and central bodies throughout Europe and the US have focused their attention and efforts on facilitating the establishment of clearing solutions for the CDS market.

The Eurozone CDS clearing offering has been launched in response to regulator and market demand and is intended to offer greater choice to the market.

LCH.Clearnet SA has defined its model keeping in line with market practice, which have been standardised through the successive ISDA Small and Big Bang protocols.

Existing key providers which have been incorporated into the process are: the DTCC Matching Platform, DTCC’s Trade Information Warehouse, Markit as the product and price provider, and ISDA for the contract characteristics and procedures.

The business model provides added value to future participants through full STP multilateral clearing, guarantee and anonymity (including novation at T+1).

The offering encompasses the core requirements as determined by key industry and policy groups, including ISDA, CESR, the ECB and the European Commission. LCH.Clearnet SA provides participants with a backloading facility in order to upload portfolios of existing CDS contracts in clearance at the business start.

(1) Source DTCC, 1st July 2011