Category II Clearing: Expediting Onboarding (CME Group, TABB Group)

May 2013

KEYWORDS: clearing, OTC derivatives, swaps, buy-side firm, Category II clearing mandate, separately managed accounts, Liquidity, futures commission merchant, FCM, derivatives clearing organization, DCO, execution, clearinghouse, swap execution facility, SEF, broker-dealer, CFTC, Commodity Futures Trading Commission, CME Group, collateral, ICE, deliverable swap futures, DSF


Will Rhode

  • CME Group, TABB Group

Buy side firms who have not yet completed test trades for cleared swaps, are now behind. An FCM or clearing broker relationship should be in place and the process of onboarding should have begun. Those commodity pools, hedge funds, and non-swap dealer banks who fall under the Category II definition but are yet to turn their attentions to clearing face a severe risk of being locked out of the swaps market after June 10. The same problem applies to those that should have complied with the Category 1 deadline of March 10 but managed to delay, as well as to those insurance companies who are reconsidering their Category III status. In practical terms, it really takes three months to complete the process – from opening up a clearing relationship to the final testing of trades.

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