CME Group and Citadel Investment Group, the hedge fund manager, plan to launch a joint venture electronic trading platform with a central clearing facility for credit default swaps within the next 30 days.
Leading derivatives exchanges and clearing firms are vying to grab prime positions in the new market for clearing CDS on a large scale, which is expected to come into being in the next few months.
The $55tr to $60tr CDS market has come under intense government scrutiny in recent months, as a source of potentially huge counterparty risk and because of its inter-relation with the structured credit markets, which have damaged so many institutions’ balance sheets.
Many in the futures industry have argued that introducing central clearing is the solution to the opaque CDS market’s problems.
CME and Citadel announced on Tuesday October 7 that they had signed a non-binding term sheet to...