×

Derivatives Clearing Group Decides Against Registration

The world’s largest clearinghouse for credit-default swaps, ICE Trust, has had second thoughts about registering with regulators, citing concerns over new rules devised to bring transparency to the $600 trillion derivatives market.

New York Stock Exchange
Photo: Oliver Quillia for CNBC.co
New York Stock Exchange

ICE Trust, a division of the Intercontinental Exchange , the big derivatives exchange, applied to be a derivatives clearing organization with the Commodity Futures Trading Commission in November. Last week, the company quietly withdrew its application.

In a Thursday letter to the commission, which was released on Tuesday, a lawyer for ICE Trust said the company changed its mind because of “significant changes proposed to” regulations for clearing organizations.

The gesture may be symbolic. In July, ICE Trust will automatically be granted status as a clearinghouse, under the Dodd-Frank financial overhaul law.

A spokesman for ICE declined to comment.

ICE, which has cleared more than $14 trillion of credit-default swaps since it started in 2009, said it had applied with the commission to bring its operations into compliance more quickly and to attract new customers before the rules went into effect in July. But the clearinghouse decided to hold off, owing to uncertainty around the process.

Over the last several weeks, the agency has outlined several proposals for clearinghouses, including a plan to limit conflicts of interest and to open the market to more competition. ICE, the dominant player in derivatives clearing, has been criticized in the past for pushing aside smaller players.

Under the Dodd-Frank rules, the trading commission and the Securities and Exchange Commission have broad authority to regulate swaps — complex financial instruments, some of which collapsed during the financial crisis.

The law requires big banks and other financial institutions to process the opaque investments through regulated clearinghouses, which serve as a backstop in case one party defaults. The rules also require swaps to be traded on regulated exchanges or on so-called swap execution facilities.