International Derivatives Clearing House
In December 2008, IDCG's subsidiary the IDCH, began accepting U.S. dollar denominated Interest Rate Swap (IRS) Futures contracts for clearing and settlement. Today, this structure provides customers with an efficient and transparent venue to clear and settle interest rate swap futures contracts.
As a member of the IDCH, trading, investment, and market-making firms are able to clear and settle new and existing OTC interest rate swap contracts traded bilaterally with dealers. New interest rate swap contracts will also be traded on an exchange.
The IDCH offers market participants the ability to replace their existing portfolio of bilateral interest rate swap contracts with economically equivalent listed
Market participants who use the EFS process to convert their OTC interest rate swaps to cleared IRS futures through IDCH reduce bilateral counterparty credit risk and simplify the ongoing processes required to manage such relationships. The substitution of bilateral counterparty credit risk with a regulated clearinghouse enables a much greater number of market participants to interact with one another with greater confidence.
Additional potential benefits to centrally clearing IRS futures contracts through IDCH include:
- Standardized valuations for cleared IRS futures contracts
- Contracts are margined in a transparent, standardized process
- IDCH cleared contracts may qualify for 60/40 tax treatment, similar to other futures contracts
- Reduction to capital reserves required for bilaterally settled OTC derivative contracts, synthetically increasing market participants' available free capital
IDCH offers clearing services for new and existing OTC IRS contracts after conversion to IRS futures contracts with maturities up to 30 years.
IDCH Contract Details
IDCH centrally clears Interest Rate Swap (IRS) Futures contracts designed to be economically equivalent to plain vanilla IRS contracts currently traded in the OTC market. IRS Futures are contracts on USD denominated interest rate swaps with a notional value of $100,000, requiring the exchange of periodic semi-annual fixed rate payments based on the futures price in exchange for quarterly floating rate payments.
Click here to view IDCG's Interest Rate Swap Futures contract specifications.
Transaction Comparison
| IDCH | Current OTC Bilateral | |
|---|---|---|
| Pre-Trade |
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| Trade |
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| Post-Trade |
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| Aggregate Time to Complete Trade | 1 day | 9 days on average during 2006* |
*According to ISDA 2007 Derivatives Benchmark Survey
IDCH Membership
A participant must have a relationship with a member of the Clearinghouse in order to clear IDEX Swap Future™ contracts.
Click here to dowload a Participant Agreement Application
Please send completed applications to:
Email: sales@idcg.com
Fax: 212.933.9801
