Washington, D.C. – Today, the Commodity Futures Trading Commission announced it is allowing a new credit derivative product to begin trading on the Chicago Mercantile Exchange (CME). Exchange-traded credit derivative products provide liquidity and transparency and allow parties to hedge counterparty credit risk.
The Commission reviewed and approved the CME’s North American Investment Grade High Volatility Credit Index Event contract, which is a contract based on an index or bundle of reference entities. The CME product involves a payout in the event of certain credit events, such as a bankruptcy or failure to pay, experienced by one or more reference entities.
The Options Clearing Corporation (OCC) also recently requested Commission review of its proposal to clear similar products to be traded on the Chicago Board Options Exchange (CBOE). As a result, the Commission today issued an exemptive order to allow the OCC to clear these products.
Approving the trading and clearing of these products provides the marketplace with valuable counterparty credit risk management products, while ensuring that appropriate public, market participant and financial protections are in place.
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