Novations

For most of the past 18 months, the development of central clearing for OTC derivatives has been focused on the race between clearing houses and buy-side participation, or lack thereof, but now the clearing landscape is starting to finally take shape in the US and Europe.

IntercontinentalExchange (NYSE: ICE), a leading operator of regulated global futures exchanges, clearing houses and over-the-counter (OTC) markets, announced the launch of Novation Consent = Confirmation (C=C) for the credit default swap (CDS) markets on its ICE Link Platform in advance of the commitment date by the 14 leading CDS market participants to regulators.

The International Swaps and Derivatives Association, Inc. (ISDA) announced that it will further streamline the process of novating or assigning credit derivative trades by way of its 'Credit Consent Equals Confirmation' project. As a key measure in this initiative, ISDA today published Additional Provisions for Consent to, and Confirmation of, Transfer by Novation of OTC Derivative Transactions.

Mark Beeston of TZero weighs in on the importance of improving processing of novations

The challenges posed by the mass processing of novations once again came to the fore this week with the publication of the latest set of OMG industry commitments to the Federal Reserve Bank of New York.  These latest set of commitments provide the basis for a real transformation of Novation processing in 2008.