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Foreign Exchange

FX clearing moves a step closer as Traiana gets CME certification

Client clearing of foreign exchange trades gathered pace on Monday after Traiana, the post-trade services group for more than 500 hedge funds, said it had become the first firm to gain certification from the CME to clear over-the-counter FX derivatives.

The certification comes after the CME published its conformance criteria for clearing of FX trades to its clearing members in December, the first clearing house to do so since the CFTC released its final rules on FX clearing late last year. Traiana, which launched its CCP Connect product on its Harmony network in March, after the publishing of the CME criteria, then enhanced its offering to support workflow for clearing, including allocations, cancellation of trades and end-of-day processing to receive certification from the CME.

 Roger Rutherford

The certification process is the culmination of months of industry consultation within various working groups to develop a business and technology model for FX clearing. “We continue to work closely with all market participants on providing clearing services for a variety of foreign exchange instruments,” Roger Rutherford, CME Group’s managing director of FX Products says in a statement. “Connecting to Traiana Harmony helps us extend our clearing services more effectively to the global FX market.”

Other clearing houses are set to release their own set of conformance standards for FX clearing, which includes such things as the minimum capital requirements for clearing members, margin requirements and required clearing member procedures in dealing with individual clients.

The London Clearing House (LCH) conducted its certification for inter-bank clients in the autumn, but has yet to announce when it will do so for client clearing, sources tell EuromoneyFXNews. The IntercontinentalExchange (ICE) is expected to begin member certification sometime in the first quarter, sources say.

So far, the CME, LCH, ICE and the SGX of Singapore have said they intend to start clearing non-deliverable forwards, while two other clearing houses, NASDAQ OMX and Euronext, are believed to be working on proposals to enter the market, sources say.

The processing of live trades from clients is expected before the end of the second quarter, with production-trading activity from clients expected to begin from March through to June.

The Chilean Peso NDF will remain the contract of focus, says Traiana – because it is seen as a good test case, and the first NDF contract it and the CME did as a “proof of concept” early last year – before clearing for all NDFs is rolled out.

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