Intercontinental Exchange has confirmed that it will stop clearing credit default swaps (CDS) in London next March and will shift the remaining activity to Chicago.
ICE, which runs the New York Stock Exchange and a derivatives trading platform in London, says it clears about 95% of all CDS across the world, contracts which insure against the bonds of companies defaulting.
Around 82% of CDS clearing at ICE is already based in Chicago, with about 12% in London, ICE said in a statement.
The decision will have no impact on the clearing of futures and options by ICE in London.
“We will be consolidating our CDS clearing services into ICE Clear Credit in Chicago from the end of March 2023,” it said.
The exchange added, “The timeline provides our CDS clearing members and their clients with time to close out and/or migrate their positions to an alternative clearing house.
The general consensus is that rivals such as theLondon Stock Exchange Group’s (LSEG) LCH clearing unit are hoping to attract customers who don’t want their business moved to Chicago.
In response to ICE’s announcement, Frank Soussan, global head of CDSClear at LSEG, said the group looked forward to expanding its services to further support the market.
Although expected, ICE’s announcement will further raise concerns about the state of clearing in London as well as the standing of the City in the worldwide financial landscape.
Market participants believe that London needs to be doing more to keep its global appeal as a financial centre after Brexit.
Clearing houses in London have been allowed to continue serving customers in the EU until June 2025. However, Brussels has said that period won’t be extended as it seeks to bolster and develop clearing capacity inside the bloc.
ICE Chicago CDS clearing house already has permission from the EU to clear for customers from the bloc, meaning any move to cut off London won’t disrupt its CDS clearing.
