BME Clearing, the Central Counterparty (CCP) of BME, has a new segment – BME Clearing Swaps – for clearing OTC interest rate swaps, having received authorisation for this activity in July.
This new segment is launched in response to the new regulation regarding the “clearing obligation”, which will make it compulsory for financial firms, insurance companies and other non-financial institutions to clear through a CCP all the Interest Rate Swaps with certain features. BME Clearing will cover all the Euro-denominated contracts affected by the new regulation.
Among the members of the new segment are some of the existing Members of BME Clearing in other segments.
Since 30 September testing has taken place to ensure the start of operations in this segment, following confirmation of the smooth functioning of the system as well as a period of fire-drills auctions during the week starting on 16 November, which required the participation of the firms.
The Interest Rate Swaps market is the largest globally, with open interest exceeding 270 trillion Euros.
Ignacio Solloa, CEO of BME Clearing, stated that “with the creation of this segment, clients of BME Clearing stand to benefit as they will be able to comply with the clearing obligation at a reasonable cost while also achieving efficiencies in capital consumption derived from using a CCP for clearing their trades, instead of taking on counterparty risk in their bilateral transactions, which involves greater capital consumption”.