Charlie McCreevy, the EU internal market commissioner, issued a statement yesterday (Thursday February 19), hailing a deal that EU regulators appear to have struck with the credit default swap market over clearing.
The statement welcomed letters from the International Swaps and Derivatives Association and the European Banking Federation, committing leading CDS dealers to use a central counterparty (CCP) based in Europe to clear CDS by the end of July.
McCreevy has been badgering the European CDS market since the autumn to start clearing trades through a CCP. At present most trades between big banks are cleared through Depository Trust & Clearing Corp, the US clearing firm, which matches trades but does not act as a central counterparty.
At first the CDS industry seemed reluctant to be pushed into CCP clearing, feeling that its previous over-the-counter structure had served it well and perhaps that it was more profitable for the big dealers.