Monday, February 6, 2012

CME Launches Gold Forwards Clearing in London

I'm sure all SD readers were just itching to get their hands on trading CMECE's new OTC London Gold Forwards.  This is the group wholly owned by our friends at the CME which claimed late last week that they were not systemically important enough to be regulated by the Dodd-Frank Act.
CME Group Inc.'s customers got their wishes answered when CME Clearing Europe (CMECE) launched its centralized clearing service for over-the-counter (OTC) London Gold Forwards on 30, January 2012. The London-based CMECE is 100 percent owned by CME Group Inc., serves CME's non-US customers and is regulated by the U.K's Financial Services Authority. CMECE started clearing OTC derivatives on 6, May 2011. What is exciting is that CMECE continues to execute its expansion plan and the London Gold Forwards is its very first physically settled product. The clearing service uses CME ClearPort to clear, settle and deliver gold forward contracts that are listed and defined under COMEX rules and regulations and governed by Chapter 334 in the NYMEX Rulebook, and have maturities ranging from "tom" to 10 years.

According to CME, the key benefit to market participants is that transactions continue to be executed OTC but are then sent to CME ClearPort for centralized clearing where CME essentially removes credit risk for market participants by providing both counterparty and delivery guarantees. 

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