Barclays clears first-ever client single-name credit default swap transactions
Industry's first cleared client single-name transaction cleared by Citadel at ICE Clear Credit; single-name clearing now allows buy-side clients to benefit from portfolio margin netting
NEW YORK--(BUSINESS WIRE)-- Barclays today announced that it cleared the industry's first single-name credit default swap (CDS) client transactions for two buy-side clients. The transactions were cleared first by Citadel and then by MKP Capital Management, L.L.C. through clearing house ICE Clear Credit, with Barclays acting as clearing broker; in both instances, the buy-side clients benefitted from portfolio margin netting.
The transactions were executed and cleared as the Securities and Exchange Commission (SEC) announced on Friday, June 7, 2013 that it was permitting select Futures Commission Merchants (FCMs) to clear single-name CDS positions for clients, and allow portfolio margining across CDS and security-based CDS.
"This is a watershed moment," said Ryan Garino, Senior Portfolio Manager and Co-Head of Convertibles and Quantitative Credit at Citadel, which executed the first cleared single-name transaction. "The ability of buy-side participants to finally enjoy the same capital efficiencies on cleared products as the dealers have had for over a year represents a critical step forward and will drive greater volume and liquidity. This in turn will lead to stronger, more efficient, and more competitive CDS markets."
"Trading in OTC derivatives is an important part of MKP's business. Our participation in the inaugural cleared single name trades reinforces our commitment to being at the forefront of these markets," said Tom DeVita, Chief Operating Officer at MKP Capital Management.
"ICE Clear Credit worked with the industry and regulators to achieve a positive outcome that enables access to risk management for the buy-side. The capital efficiency provided by ICE Clear Credit's portfolio margining methodology advances the goals of Dodd-Frank to reduce systemic risk through clearing. We are pleased to see buy-side clients begin voluntary clearing of single names," said Chris Edmonds, President at ICE Clear Credit.
"Barclays is pleased to have been able to lead the industry with the first client cleared single-name CDS," said Peter Borstelmann, North America Head of OTC Derivatives Clearing at Barclays. "As we move to the final phase of mandatory clearing in the US, we're pleased that the industry has been able to work with its regulators to achieve portfolio margining benefits as a core benefit of clearing for the buy-side. It is important that we continue to work closely together to further enhance the clearing of security based swaps for the buy-side."
Barclays is now able to provide clearing clients with the ability to achieve portfolio margin netting across approximately 300 eligible single-name CDS and CDS index trades, an extension of its existing portfolio netting service. Earlier this year, Barclays became the only FCM to offer clients portfolio margining across interest rate swaps and futures. This benefit was achieved through Barclays' unique business model, with its Agency Derivatives Services platform combining all of the services of OTC derivatives and futures clearing with foreign exchange prime brokerage.
Since clearing the industry's first client CDS transaction and the first client interest rates transaction in December 2009, Barclays has maintained a leadership position in OTC derivatives clearing. At the end of May 2013, Barclays had cleared notional transactions in excess of $18 trillion for approximately 50 parent manager clients. The more than 71,500 interest rate, credit and foreign exchange derivatives contracts were cleared by regional banks, investment managers, pension funds, insurance, hedge funds and government agencies across the world.
Barclays is a major global financial services provider engaged in personal banking, credit cards, corporate and investment banking and wealth and investment management with an extensive international presence in Europe, the Americas, Africa and Asia. Barclays' purpose is to help people achieve their ambitions - in the right way. With over 300 years of history and expertise in banking, Barclays operates in over 50 countries and employs approximately 140,000 people. Barclays moves, lends, invests and protects money for customers and clients worldwide. Barclays offers premier investment banking products and services to its clients through Barclays Bank PLC. For more information, visit www.barclays.com
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