CME, Citadel Team Up For CDS Clearing Facility
October 8, 2008
CME Group, the world’s largest derivatives exchange, and hedge fund Citadel Investment Group said on Tuesday they have teamed up to create a central counterparty clearing facility for credit default swaps.
CME Group, which runs the Chicago Mercantile Exchange, NYMEX and the Chicago Board of Trade, will be the central counterparty for the venture.
The joint venture will operate as an independent organization with its own board of directors and management team.
CME Group and Citadel said they have invited major credit default swaps, or CDS, market participants to join as founding members by putting up as much as 30% of the equity in the venture. The founding members will get market maker privileges.
The CDS market, which has grown dramatically in recent years, allows investors to effectively buy insurance or protection against a corporations default.
In a survey of 68 firms, an industry organization, the International Swaps and Derivatives Association, found that the notional amount outstanding of CDS dropped 12% to $54.6 trillion in the first half of 2008.
For more information on related topics, visit the following:
