Interest Rate Swap Goes on-Exchange as Korea Mandates CCP

The Korea Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term (KRX) has begun on March 3rd, 2014 to provide voluntary Clearing Clearing Clearing is a general term that simply means many different things depending on the subject and related industry. Most commonly, this refers to the reciprocal exchange between banks of checks and drafts, and the settlement of the differences, or the total of claims settled at a clearinghouse. In finance and banking, the word clearing has different meanings depending on the more specific business model. Moving checks from the bank where they were deposited to the bank on which they were drawn. Th Clearing is a general term that simply means many different things depending on the subject and related industry. Most commonly, this refers to the reciprocal exchange between banks of checks and drafts, and the settlement of the differences, or the total of claims settled at a clearinghouse. In finance and banking, the word clearing has different meanings depending on the more specific business model. Moving checks from the bank where they were deposited to the bank on which they were drawn. Th Read this Term services for the Korean Won (KRW) denominated Interest Rate Swap (IRS) contracts in order to meet the G20 mandate of September 2009 on over-the-counter (OTC) derivatives clearing.

According to the announcement, the KRX expects the new service will significantly lower systemic risks in OTC Won derivative clearing and also improve overall market transparency in Korea.

The service is currently only offered to thirty five members of the exchange on a voluntary basis until June 30. Thereafter, all KRW-IRS contracts are to be cleared through KRX on a mandatory basis, making KRX the third Central Counterparty (CCP) in the world to offer mandatory clearing of OTC derivatives after Japan and the US.

The next market expected to require CCP clearing is Europe, where the EMIR regulations will presumably mandate it later this year. Other regional venues which have recently established themselves as CCPs, include HKEx in Hong Kong, Moscow Exchange in Russia and the Dubai Gold and Commodities Exchange in the Middle East, but none of them so far, enjoys a government mandate over OTC derivatives clearing.