The September 9 Category III clearing deadline is upon us - pension funds, ERISA funds, and endowments will soon be mandated to centrally clear their Over-the-Counter (OTC) swaps. The majority of Category III participants have already been onboarded during the Category II onboarding of asset managers. While Category III appears less climactic than the June 10 Category II deadline, over which there was intense industry scrutiny, it nevertheless marks a significant milestone in the implementation of the Dodd-Frank Act (DFA). Marking the final phase of clearing as it does, we will now get a much better picture of the competitive lay of the land for client clearing among Derivative Clearing Organizations (DCOs) in the US, particularly in rates. Pension funds are heavy users of interest rate swaps (IRS), which they use to manage liability exposures, but they are less active in Credit Default Swaps (CDS)
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