CME Group To Exit OTC Credit Clearing Business

CME Group announced that it will stop clearing credit defaults swaps by mid-2018.

The group said that it will "focus its over-the-counter (OTC) clearing services on interest rate swaps (IRS) and foreign exchange." As a result of the change, CME will dissolve its CDS guarantee fund, which will return $650 million in capital to clearing members. CME said that it will "work with CDS open interest holders and regulators to ensure an efficient and seamless transition for the credit market," and continue to provide full clearing services to members for the duration of the transition period.

Commentary / Steven Lofchie

That one of the most significant entities in the clearing business is pulling back demonstrates how ill-conceived the rush to force central clearing was, and how much of it simply did not live up to the hype. Central clearing is a viable procedure for the most liquid derivative products; it is not a replacement for a diverse OTC market.