Clearport

The issue, according to persons involved in the discussions, is that the transactions Clearport handles generally aren't agreed upon in an open market, but negotiated privately.

CME Exploring 'Alternatives' for Swap-Clearing Platform 2010

Requiring CME to treat all Clearport-listed products as swaps, instead of converting some to futures contracts, could see the exchange company lose market share in the business, according to observers.

CME Exploring 'Alternatives' for Swap-Clearing Platform 2010

A report last week from Equity Research Desk estimated that CME could see an 11% decline in income if the transactions handled by Clearport are made clearable at other venues by the coming regulations.

CME Exploring 'Alternatives' for Swap-Clearing Platform 2010

The CFTC is trying to reconcile the operation of Clearport with new rules aimed at providing a better view of activity and pricing in off-exchange markets, according to people involved in the discussions.

CME Exploring 'Alternatives' for Swap-Clearing Platform 2010

Clearport, CME Group's platform for backing up energy - and agriculture-related swap deals, has come under scrutiny at the Commodity Futures Trading Commission as the agency prepares to erect a new regulatory framework around derivatives trading.

CME Exploring 'Alternatives' for Swap-Clearing Platform 2010

Some trades, including in customized options transactions facilitated by Clearport, are unlikely to move, given their complexity, according to the report.

CME Exploring 'Alternatives' for Swap-Clearing Platform 2010

The latter provision is key to the discussions around Clearport, which passes privately negotiated swap deals into CME's clearinghouse.

CME Exploring 'Alternatives' for Swap-Clearing Platform 2010

Many of the more than 700 products that Clearport handles are converted into futures contracts for the purposes of clearing, which carries tax benefits and makes posting collateral more efficient.

CME Exploring 'Alternatives' for Swap-Clearing Platform 2010

The debate has raised questions around the future shape of Clearport, an eight-year-old business that contributed about 10% of CME's revenue in the second quarter of 2010.

CME Exploring 'Alternatives' for Swap-Clearing Platform 2010

One potential alternative for Clearport would be to add a transaction execution capability, and to register the platform with regulators as a "swap execution facility," according to people involved in the discussions.

CME Exploring 'Alternatives' for Swap-Clearing Platform 2010