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Thursday, October 1, 2009

CME downplays reliance on OTC for growth

(Reuters) - CME Group Inc.'s overall growth is "absolutely not" dependent on its over-the-counter clearing venture, the head of the world's biggest derivatives exchange operator said on Thursday.

Chicago-based CME has for nearly a year planned to clear OTC-traded credit default swaps.

OTC clearing is a "very compelling and significant growth opportunity for us, but I think it's additive to the growth that I think we can achieve through these other things," CEO Craig Donohue told investors.

He said there is a "global expanding pie in derivatives," adding that markets in North America and Europe are fairly mature while those in emerging markets are relatively immature.

Kim Taylor, a CME managing director, added at the investor meeting that the company expects its European clearinghouse for CDS and other products to get British Financial Services Authority approval by about year's end. CME is now in talks with possible members for the European venture, Taylor said.

Following the credit crisis, governments and regulators on both sides of the Atlantic have pushed for clearinghouses to act as central counterparty between OTC traders to eliminate the risk of defaults. The $26 trillion CDS market has attracted much of the new scrutiny.

CME said last month it planned to announce the launch of its U.S. CDS clearinghouse "in the weeks ahead." Smaller rival IntercontinentalExchange Inc. started clearing U.S. CDS in March, and European CDS in July. ICE's cleared volume was about $156 billion last week.

CME accounts for about 25 percent of the global futures and options market, but only 4 percent of the much larger OTC and exchange-traded derivatives market. Its shares were off 3.9 percent at $296.19 in afternoon trading on Nasdaq.

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