Clearing House Advisory Notices
To | Clearing Member Firms; Back Office Managers
From | Clearing House Department
Subject | Clearing and Bookkeeping Processing for CME Swaps on Swapstream
Notice Date | 2007-07-24
Notice Number | 07-173
Effective Date | 2007-07-24
In the first quarter of 2008, CME will introduce an innovative new product: CME Swaps on Swapstream, also known as standardized cleared interest-rate swaps. These swaps will trade electronically on CME's Swapstream™ swaps trading system. The initial swap products to be offered will be IMM-dated fixed versus floating: USD-denominated on 3-month LIBOR, and EUR-denominated on 6-month EURIBOR. CME Swaps on Swapstream will be cleared and guaranteed by CME Clearing, and will provide market participants with many operational efficiences, including: Swap positions will be kept on a net basis unless firms specify otherwise, and it will be possible to liquidate positions simply by executing an offsetting trade. Swap positions will be marked to market daily, and the resulting amounts will be banked normally, exactly like futures settlement variation. And the effect of coupon payments will be included in the daily mark to market process. In other words, it will not be necessary to manage cash flows associated with coupons, track reset dates, or rely on cumbersome and expensive "tear-up" solutions. For the full text of this advisory...