) announced its intention of launching ICE Trade Vault as a swap
data repository (SDR), after it received a provisional approval
from the Commodity Futures Trading Commission (CFTC) yesterday.
Accordingly, ICE plans to initially launch ICE Trade Vault as a
SDR for the asset classes that include commodity and energy,
interest rate swaps (IRS), credit default swaps (CDS) and foreign
exchange (FX) contracts. However, the company will primarily
concentrate on commodity and energy asset classes and will
eventually upgrade to tap the opportunities in other asset classes
within the approval list.
While CFTC has granted a provisional approval to ICE, the final
regulations regarding SDR will likely be completed by the end of
this year. These regulations are a part of the mandates under the
Dodd-Frank Act enacted in 2010, which required swap derivatives to
be channeled through clearinghouses and increase databases in order
to generate transparency in the swaps market.
Hence, such swap repositories are built to better collect and
understand information of the fluctuations in trade prices and
volumes. This process will also help the exchange clients to
determine the swaps that can be cleared, which again can aid in
minimizing defaults. Nevertheless, this approval has opened an
array of opportunities for the company as ICE Trade Vault is the
first SDR to be provisionally registered by the CFTC.
Additionally, ICE Trade Vault is also expected to benefit from
the ICE's own efficiently operating over-the-counter (OTC) markets
and ICE eConfirm - an industry benchmark for confirmation of
electronic trades. While ICE Trade Vault's beta version has already
hit the market, its production version is expected to be launched
later this year.
The new information data base application will further boost the
efficiency of swap trades, while also making it compliant with
regulations and new reporting requirements. This again ensures a
secure, transparent and cost-efficient trading within ICE.
Consequently, ICE Trade Vault has already enrolled about 250
customers ahead of the launch.
Over the past couple of years, the market was already aware that
stringent regulations will be forwarded. However, not many players
in the market would be prepared for it. The 2008 economic turmoil
impelled the regulators to change and make new rules in order to
minimize risk and maintain stability.
While ICE has been constantly modifying its infrastructure to
suit the new regulations, it is to be seen going forward how much
the company's peers,
CME Group Inc.
CBOE Holdings Inc.
) among others, are prepared for it.
Currently, ICE carries a Zacks Rank #3, translating into a
short-term Hold rating and a long-term Neutral recommendation.
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INTERCONTINENTL (ICE): Free Stock Analysis
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