London, 04 May 2023 – OSTTRA, the global post-trade solutions company today announced that its counterparty risk optimisation service, OSTTRA triBalance, has successfully completed five of a series of rebalancing cycles, reducing open interest and moving residual positions to alternative clearing houses ahead of the closure of the CDS clearing service at ICE Clear Europe later this year.
OSTTRA delivered a reduction of more than $190 billion equivalent in open interest in Indices and selected Single Name CDS at ICE Clear Europe, approximately 50% of the Indices and between 85% and 98% of Telecom, Technology, Utilities, Basic Materials, Energy, Healthcare and Consumer Goods and Services Single Name CDS positions were closed out.
These results are particularly impressive given that approximately 35% of the index open interest in scope of the closure was in instruments that are subject to regulatory restrictions. As of 30 March, regulators1 have provided a time-limited exemption, to allow for the inclusion of the instruments that were previously restricted, until the closure of the CDS clearing service at ICE Clear Europe, to aid firms with the risk moves.
Following ICE Clear Europe’s decision to exit the CDS clearing business, market participants need to migrate their positions from ICE Clear Europe to either ICE Clear Credit or LCH SA.
With a central role in post trade workflows for credit derivatives, OSTTRA is uniquely placed to support the industry in a robust, cost-efficient and timely transition. The solution combines the extensive risk transfer and optimisation capabilities of OSTTRA triBalance, with trade processing via OSTTRA MarkitWire and TradeServ to ensure new positions are accurately reflected at CCPs and in the Trade Information Warehouse.
“In collaboration with market participants and OSTTRA, ICE Clear Europe has reached an important milestone in the work towards the cessation of its CDS clearing service,” said Hester Serafini, President of ICE Clear Europe. “The compression service allows market participants to smoothly migrate their CDS positions and the first cycles have been very successful. We look forward to future iterations over the coming months.”
“We are delighted with the results of the transition cycles, providing market participants with an innovative solution to manage an orderly exit. The open interest reductions achieved, and the smooth running of the whole process demonstrate the value that OSTTRA can deliver, contributing to the smooth and efficient running of the credit derivatives market” concluded Erik Petri, Head of OSTTRA triReduce & triBalance.
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1The time limited exemptions can be found here CFTC, FCA, ESMA.