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Canadian Clearing, Interoperability Take Shape

Derivatives Week

--Katy Burne

The Canadian Derivatives Clearing Corporation is working to finalize an over-the-counter derivatives clearing platform (CCP) with six domestic banks. As part of the initiative, it is in discussions with major international clearing organizations about facilitating domestic execution alongside cross-border margining and settlement—a long sought-after solution known as interoperability.

"We’ve been asked by domestic participants [who are clearing members] to consider all forms of international access," said Glenn Goucher, senior v.p. and chief clearing officer at CDCC, a subsidiary of TMX Group. "We think it’ll be good business for us to figure out a method...for us to become direct clearing organizations in different jurisdictions, or through partnerships to expand the pool of participants in Canada."

In December the company won a competitive tender to build a central counterparty clearing platform for repurchase agreements, which it hopes to have ready this year. Sometime in 2011 it will roll out clearing for vanilla OTC interest rates and fx instruments. Credit default swaps clearing is not on the horizon because only a fraction of the CDS by domestic banks reference Canadian credits and there is insufficient interest.

Driving the need for a domestic model is Canadian banks’ reticence to use foreign CCPs, according to George Kormas, director of business development for clearing.

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