Celebrating 'Dodd-Frank Day'

By Will Rhode, TABB Group

Originally published on Tabb Forum 

March 11 was officially "Dodd-Frank Day" -- the day most active users of swaps in the US were required to begin complying with the central clearing mandate, arguably the single biggest pillar in the G20’s 2009 commitment to overhaul the over-the-counter derivatives market. It was a momentous occasion, the impact of which we can already observe.                                     

Since last November’s announcement by the Commodities Futures Trading Commission (CFTC) of a timeline for the clearing of interest rate swaps, basis swaps, FRAs, overnight index swaps, and US and European index CDSs, two trends have started to emerge. The first is a visible uptick in client clearing for interest rate swaps. The second is a negative effect in credit default swaps (CDS) clearing – possibly the result of the so-called swaps futurization trend.

In terms of interest rate swaps, clearing at the CME has increased 59%, to reach US$904 billion in outstanding interest as of March 5. Meanwhile, at the two largest clearinghouses for CDSs in the US, the CME and ICE, clearing volumes have fallen since the CFTC’s November timeline announcement.