LCH plans to let banks clear self-referencing CDSs
Move will facilitate index arbitrage trades and put CDSClear one step ahead of rival Ice, note FCMs
LCH’s CDSClear is planning a shake-up of the cleared single-name credit default swaps market, with a proposed rule change that would allow members to clear client trades referencing their own creditworthiness.
The central counterparty issued fresh clearing procedures in December, stating futures commission merchants (FCMs) may clear single-name CDSs on their own bank – so called ‘self-referencing transactions’ – on behalf of clients, provided they pay sufficient margin to cover the inherent
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