Bloomberg – Intercontinental Exchange Inc.’s bid to be the top U.S. guarantor of credit-default swap trades won Federal Reserve approval, leaving the Securities and Exchange Commission as the futures market’s final regulatory hurdle.

Intercontinental and larger rival CME Group Inc. are among four clearinghouse owners vying to back the $27 trillion credit- default swap market, with the winner standing to gain as much as $400 million a year in revenue, according to estimates by Wachovia Capital Markets and Keefe Bruyette & Woods Inc.

“I don’t think the SEC will have any issues” signing off Intercontinental’s clearing plans after the Fed approved them yesterday, said Brian Yelvington, an analyst at CreditSights Inc. in New York. “I hope it’s a rubber stamp, because given the new regulatory regime I would hope this has been a carefully coordinated process.”

Regulators on both sides of the Atlantic are developing separate plans to stabilize the derivatives market after American International Group Inc., once the world’s largest insurer, almost went bankrupt last year from its use of credit- default swaps. The unregulated, privately traded contracts stymied government efforts to assess bank credit risk because the full range of trades between dealers was unknown.

SEC spokesman John Nester said he didn’t know when the agency will make a decision. “The proposal is under active consideration,” he said in an interview yesterday.

Read Complete Article

Tags: american international group inc, american-international-group, credit default swaps, credit risk, credit-default-swap, creditsights inc, derivatives market, futures market, government efforts, guarantor, intercontinental exchange inc, international-group-inc, keefe bruyette, regulatory hurdle, regulatory-regime, securities-and-exchange-commission, spokesman john, swap market, yelvington