As a leading futures exchange, CME Group has always made clearing a significant part of our business and our industry. But until recently, clearing may not have been fully appreciated in broader financial circles. In the current environment of counterparty risk concerns and credit constraints, however, it has taken on increasing importance as a key distinguishing feature of our markets.

Clearing houses like CME Clearing manage market risk by serving as the buyer to every seller and the seller to every buyer, thereby guaranteeing the performance of every transaction. As a result, if one of the participants in a transaction defaults, the impact is contained between the defaulting participant and the clearing house. With the default contained, other market participants are protected against the systemic risk that can so easily and destructively ripple through a market.

Earlier this year, The Wall Street Journ al noted that “central counterparty risk-sharing principles are well understood and have withstood the test of time.” There is growing interest in replicating this time-tested risk management model in the over-the-counter (OTC) market as a way to allow it to function more smoothly and regain participant confidence. In this issue of CME Group Magazine , the article, “Will Stormy Skies Give Way to Clearing?” explores the growing interest and potential for extending clearing services in the OTC market.

In addition to clearing, we highlight several other factors that are having an impact on financial markets:

• Technology continues to transform our business. We have asked several of the largest independent software vendors to share their thoughts on the latest technology trends.
• Proprietary trading firms have grown into major participants in the markets across multiple asset classes. We profile Infinium, a firm that is active in CME Group’s options markets.
• World demand for grains is expected to grow. Market observers look at how weather, technology and rising standards of living are influencing the principles that affect prices.

Our world is one of constant change and new challenges. At CME Group, we continuously explore how we can use our core strengths in clearing and other areas to help our customers find new opportunities to handle such changes and challenges.

 

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