CME, ICE Clearinghouses designated systemic by U.S. panel

May 23, 2012 10:06 AM

May 23 (Bloomberg) -- Derivatives clearinghouses owned by CME Group Inc. and Intercontinental Exchange Inc. have been designated systemically important by U.S. regulators, moving them closer to heightened supervision under the Dodd-Frank Act.

ICE Clear Credit, the world’s largest clearinghouse for credit-default swaps, and CME Inc., a unit of the biggest futures exchange, got designations from the Financial Stability Oversight Council, a panel of regulators created by the 2010 regulatory law. The moves were confirmed by Kelly Loeffler, a spokeswoman for Atlanta-based Intercontinental Exchange, and Michael Shore, a spokesman for Chicago-based CME Group.

The designations were approved this week by FSOC as part of an initial set of so-called financial market utilities that require increased oversight by regulators including the Federal Reserve. The designations, subject to appeal, may be completed “as early as this summer,” according to Anthony Coley, a U.S. Treasury Department spokesman.

Dodd-Frank, U.S. lawmakers’ response to the 2008 credit crisis, requires most swaps to be guaranteed by clearinghouses that stand between buyers and sellers to reduce risk in the financial system. The systemic designation will be the FSOC’s first delineation of which companies aside from banks would threaten the broader economy if they collapse.

DTCC, Clearing House

The Depository Trust and Clearing Corp. got proposed designations for three of its units, according to Craig Donner, a spokesman. The National Securities Clearing Corp., DTCC’s clearing and settlement subsidiary for equities, and corporate and municipal securities, and the Fixed Income Clearing Corp., its clearing and settlement arm for U.S. Treasury and agency mortgage-backed securities, were named by FSOC. The Depository Trust Co. subsidiary also received notification, Donner said.

“As the primary infrastructure responsible for the clearance and settlement of nearly all securities traded in the U.S. cash markets, these DTCC subsidiaries play critical roles in mitigating risk and ensuring the safe and seamless operation of the U.S. capital markets,” Donner said. “We are neither surprised at, nor do we disagree with, the designation being considered by the FSOC.”

The Clearing House Payments Co. LLC, which operates a cross-border and domestic wire-transfer system, also received a letter of designation, according to Erica Hurtt, vice president for communications at the Clearing House. The Clearing House Interbank Payment System, known as Chips, handles $1.5 trillion of transactions daily, according to its website.

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