ICE to cease CDS clearing in London in March 2023

·2-min read
FILE PHOTO: A screen displays the ticker symbol and logo for Intercontinental Exchange Inc. (ICE) on the floor of the NYSE

By Huw Jones

LONDON (Reuters) - Intercontinental Exchange said on Thursday it would stop clearing credit default swaps in London next year and shift the activity to Chicago, helping to shield itself from any rupture from the European Union.

The loss of clearing business will stoke concerns that London needs to do more to keep its global appeal as a financial centre after being largely cut off from the EU since Brexit, with the government on Thursday promising finance a "reset".

"We will be consolidating our CDS clearing services into ICE Clear Credit in Chicago from the end of March 2023," ICE said in a statement, confirming a Reuters report in March.

"The timeline provides our CDS clearing members and their clients with time to close out and/or migrate their positions to an alternative clearing house," ICE said.

Rivals like London Stock Exchange Group's (LSEG) LCH clearing unit are likely to see if they can pick up customers who don't want their business moved to Chicago.

In response to ICE's announcement, Frank Soussan, Global Head of CDSClear at LSEG, said CDSClear looked forward to expanding its services to further support the market.

ICE, which runs the New York Stock Exchange and a derivatives trading platform in London, says it clears about 95% of all CDS across the world, contracts which insure against the bonds of companies defaulting.

Some 82% of CDS clearing at ICE is already based in Chicago, with about 12% in London, it said.

The decision will have no impact on the clearing of futures and options by ICE in London.

Clearing houses in London, such as ICE and London Stock Exchange's LCH unit, have been allowed to continue serving customers in the EU until June 2025.

Brussels has said that period won't be extended as it seeks to build clearing capacity inside the bloc.

Its Chicago CDS clearing house already has permission from the EU to clear for customers from the bloc, meaning any move to cut off London won't disrupt its CDS clearing.

(Reporting by Huw Jones; Editing by Toby Chopra and Mark Potter)