CME is to close its credit default swap (CDS) clearing business by the middle of next year it has announced.
The Chicago-headquartered exchange group said it will manage an orderly wind-down of the business that will release $650m in capital to clearing members. In the future it will focus on OTC clearing services for interest rate swaps (IRS) and foreign exchange.
CME said it will work closely with CDS open interest holders and regulators to ensure a seamless transition for credit markets and will provide full clearing services throughout the transition.
Pending regulatory approval it will also provide fee waivers on CDS clearing and facilitate the bulk transfer of open positions. Once the transition is complete, the CDS guarantee fund will be dissolved and, returning cash to clearing members.
CME added that it is currently working on several innovations to provide clearing efficiency in other areas. This includes launching OTC FX options clearing by the end of this year, delivering cleared OTC IRS in Chinese yuan and Columbian peso, and expanding capital efficiencies for its OTC IRS and FX offering.
The move is the latest in a series of setbacks for CME, which earlier this year pulled the plug on its European venture which had struggled to make its mark on the continent.