CME plans soft launch on interest-rate swaps

By Reuters
Posted Sep. 14, 2010 at 2:20 p.m.

CME Group Inc., which operates one of the world’s biggest clearinghouses, is planning a soft launch for interest-rate swaps clearing by the end of 2010, its chief financial officer said Tuesday.

CME staffers are working daily with dealers and buy-side market participants to prepare for the launch, CME Chief Financial Officer Jamie Parisi said at a Barclays Capital conference for analysts and investors.
The launch follows a Wall Street reform law that mandates clearing for a large chunk of the $615 trillion over-the-counter derivatives market.

“You can imagine that there’s pressure from all sides to get this done,” he said, noting countervailing pressures that are slowing the process down. “There’s a lot of people being very careful in how this gets structured moving forward.”

Parisi warned that the new business won’t be an immediate revenue bonanza for the company.

“We’ve talked about this as a long-term opportunity. This isn’t going to be flicking on a light switch,” he said, citing clearing efforts in energy that took years to start generating meaningful revenue.

“It’s also a somewhat lower-margin business for us versus our core business,” he said. Dealers who control the over-the-counter market — such as the big Wall Street banks — see the clearing model as a potential threat to their profits.

“They can be very protective,” he said.

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