Citadel-Backed CDS Clearinghouse Gets Cold Shoulder

Mar 20 2009 | 2:08am ET

Despite its best efforts to steal a march on its rivals, Citadel Investment Group’s credit-default swap clearinghouse finds itself lagging behind.

CMDX, a joint venture between Chicago neighbors Citadel and the CME Group, won final regulatory approval last week and is ready to begin processing trades. But it lacks customers—any customers—and has yet to clear a single trade, Bloomberg News reports.

Meanwhile, its chief rival, the CDS clearinghouse run by the Intercontinental Exchange and backed by nine banks, including several Wall Street giants, cleared $7.15 billion in CDS last week, the first time the swaps have ever been processed by a clearinghouse.

When Citadel and the CME announced their plans in October, they aimed to get their clearinghouse up and running before the Wall Street-backed entity debuted. But the ICE won its regulatory approval a week before CMDX, and its backers, among them Goldman Sachs and JPMorgan Chase, are clearing their trades with the ICE.

A CME spokesman told Bloomberg that CMDX expects to begin clearing “in the coming weeks” and is in talks with several potential customers.

The Citadel-backed system is not the only CDS clearinghouse awaiting its first customer: NYSE Euronext has actually been ready to process the trades since December, but hasn’t found any takers for its services.


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