John McKenzie

The company, which serves as Canada’s equities and fixed income clearinghouse, designed the new infrastructure under its post-trade modernisation initiative (PTM), replacing certain legacy systems related to clearing and settlement, and depository and entitlement payments.  

Through upgrading the infrastructure, TMX claims that the evolving needs of marketplace participants, regulators, investors, financial institutions will be better served with enhanced security, simplified user interaction, and greater flexibility for future enhancements. 

“Post trade modernisation represents a game-changer for Canada’s equities, fixed income and OTC clearinghouse and a key milestone in the evolution of TMX,” said John McKenzie, chief executive of TMX Group. 

“The launch of the new platform advances our core technology capability and ultimately strengthens Canada’s ability to compete for global investment,” McKenzie continued. “TMX’s investment in clearing technology also delivers on our enterprise wide commitment to ensuring these critical systems are efficient, resilient and adaptive.” 

The newly upgraded infrastructure is powered by Tata Consultancy Service’s scalable and standards compliant clearing and settlement solution, TCS BaNCS for Market Infrastructure.  

The Toronto-based company has also said that the new platform will provide important upgrades to critical components of Canada’s capital markets infrastructure. 

Kevin Sampson, CDS president, said: “The successful completion of the complex PTM project is the culmination of a great deal of hard work by a dedicated team here across clearing and technology divisions, working in close collaboration with TCS, and our network of industry participants.”  

The move is also set to build into recent initiatives launched by the firm, such as its Canadian Collateral Management Service (CCMS) announced in 2024, which aims to optimise triparty collateral management and reduce operational risk.  

Read more – TMX VettaFi Acquires Credit Suisse bond index suite from UBS 

Most recently, TMX Group’s subsidiary acquired Credit Suisse bond indices from UBS in February 2025, in a push to bolster its fixed income index capabilities.  

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In a statement released by the Vatican, Pope Francis laid out his views on ethics with regards to some aspects of the financial system, focusing primarily on the derivatives market. 

He explained derivatives products are, “less acceptable from the perspective of ethics respectful of the truth and the common good, because it transforms them into a ticking time bomb ready sooner or later to explode, poisoning the health of the markets”.

Pope Francis targeted credit default swaps (CDS) in particular, describing them as being unethical due to the way they allow gambling at the risk of bankruptcy of a third party. 

“The spread of such a kind of contract without proper limits has encouraged the growth of a finance of chance, and of gambling on the failure of others, which is unacceptable from the ethical point of view,” he said. 

Pope Francis noted an “ethical void” when such products are traded and negotiated over-the-counter (OTC) because this method is less regulated and takes “vital life-lines and investments to the real economy”. 

He also expressed concerns around the Libor scandals which saw fraudulent manipulation and rigging at the hands of some of the world’s largest financial players. Pope Francis said that the fact this happened for many years reflects how “fragile and exposed to fraud” unregulated aspects of the financial system truly are.

“In this environment, the establishment of real “networks” of connivance, among those persons who were instead predisposed for the correct fixing of those rates, form, by coincidence, a criminal association, particularly harmful for the common good, which inflicts a dangerous wound to the health of the economic system,” he said. “It must be penalised with adequate punishments and be discouraged from repetition.”

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Until now, buy-side firms have been inveterately shy of becoming signed up members of CDS central counterparties (CCPs). These are early days but some believe the move could be the first step for a return to liquidity in the single name CDS business which has languished since the financial crisis.

Amundi went live on LCH’s CDSClear platform and has already been clearing trades through its clearing broker BNP Paribas. Christophe Marcilloux, deputy head, fixed income dealing at Amundi, says there are some significant benefits to joining up as a direct clearing member.

“Before clearing we had the legal documentation in place with counterparties and traded bilaterally with them,” he says. “Now we have got a model that’s closer to what you’re seeing in the listed futures world. The combination of having both a strong CCP and being a clearing member helps to mitigate risk and makes the workflow easier while associated costs are reasonable.”

The move comes in preparation of the central clearing mandate under the European Market Infrastructure Regulation (EMIR) which requires clearing of certain index CDS products by August. While participants have looked at bringing in other initiatives to promote liquidity—the introduction of CDS futures is one such—getting the regulatory kick is something that, it is hoped, can really spur interest in CDS use.

Indeed Europe needs only look to the US for its lead. Central clearing of index CDS received its biggest boost in the US in 2013 with the clearing mandate issued under the Dodd-Frank Act. And, since then, clearing has soared. According to the Intercontinental Exchange (ICE), which operates ICE Clear Credit, the biggest CDS clearing house (CCP) globally, total notional volumes of cleared index CDS for the buy-side stood at $6.9trn in 2016, almost double the $3.7trn cleared in 2013, the year the mandate was issued.

A constant drive

In truth, CCPs in Europe have been attempting to get more buy-siders involved in clearing for a number of years now. LCHs drive to involve more buy-siders onto its own service actually began in 2012 but it has taken a while for this to bear fruit. The first stage was getting increased dealer liquidity.

“Reducing systemic risk is a goal for the whole market, so it makes sense for a CCP to serve both dealers and clients,” says Frank Soussan, global head of CDSClear at LCH. “We reshaped our CDS clearing model a couple of years ago to help grow our interdealer liquidity and market share. In turn, we have now reached a certain liquidity threshold that makes us more attractive for clients.”

Despite being better known as an interest rate clearing house, LCH does have a stronger presence in Europe than its competitor ICE. Amundi’s Marcilloux says the strength in Europe was one of the prime draws of the CCP.

“It provides us comfort to face LCH as we are happy with its risk methods and the fact it is based in [continental Europe so it can access European central bank liquidity,” he says. 

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Amundi has gone live on CDSClear via its clearing broker BNP Paribas, giving it access to LCH’s portfolio margining service for correlated CDS contracts.

“Risk management is a top priority for us and our investors, and by clearing through LCH we are able to benefit from an experienced and robust CCP, that proved instrumental in accompanying us on mandatory clearing,” said Emmanuel Gaffet, head of dealing risk management, Amundi.

Buy-side firms have recently stepped up their demands for mandatory clearing of single-name CDS in a bid to revive liquidity and bring market makers back to the once widely traded market.

In December 2014, 25 buy-side firms pledged to begin voluntary clearing of single-name CDS, including BlackRock, BlueMountain Capital Management, Citadel, Eaton Vance and PIMCO.

By adding transparency around pricing of single-name CDS through clearing, this would increase confidence in the market, the firms claimed.

“This launch is an important development for us and the industry as it gives buy-side firms more choice of where to clear their CDS contracts, following the introduction of the non-cleared margin requirements and credit clearing mandate in Europe,” added Raphael Masgnaux, global head of prime solutions & financing, BNP Paribas.

From the second quarter of this year, buy-side firms trading CDS will be able to connect directly to LCH.SA through two additional clearing brokers, enabling a larger number of end-users to gain access to clearing and capital efficiencies. 

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The platform, named ICE Swap, allows trading in single-name CDS via a central limit order book (CLOB), and will integrate the remaining clientele from Creditex, ICE’s inter-dealer broker for CDS and bonds.

According to a release from ICE, it is the first platform to include both anonymous and “name give up” execution in the same order book, allowing buy- and sell-side users to choose whether to reveal their identity after the trade.

“ICE Swap is the only single name CDS platform offering cleared-only liquidity across the credit spectrum while extending established electronic trading protocols to the entire CDS market,” said Krishan Singh, president of ICE Swap Trade.

“We’re pleased that a number of trades have already been executed by both the sell-side and buy-side in the first few days post launch.”

ICE began efforts to launch a buy-side centric anonymous trading platform in the single-name CDS market last year, as first reported by Reuters, with the belief that an exchange-like platform for trading bilateral contracts will open the doors for new liquidity providers.

Interest in the single-name CDS market has dwindled in recent years due to the bad reputation it gained after the financial crisis. 

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ICE’s CDS clearing houses will now clear credit default swaps for the iTraxx Australia and iTraxx Asia ex-Japan Investment Grade indices.

The company will also clear six additional sovereign names: Australia, China, Indonesia, Korea, Malaysia and the Philippines.

The launch will take the number of sovereign names cleared by ICE Clear Credit to 27 globally while ICE Clear Europe clears seven sovereign CDS names in Europe.

Stan Ivanov, president of ICE Clear Credit, said in a statement that the expansion to the company’s services represents a ‘truly global’ suite of products.

In the statement to market, ICE said that transactions cleared in the first two months of this year had surpassed those cleared in total for all of 2015.

ICE launched its CDS clearing houses in 2009. Its credit CDS clearing house businesses clear more than 500 single name and index CDS instruments based on corporate and sovereign debt.

In March, ICE said it was considering launching a bid for the London Stock Exchange Group (LSEG).

However, Deutsche Boerse and the LSEG officially agreed on an all-share ‘merger of equals’. 

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Jonathan Hill, EU commissioner for Financial Stability, Financial Services and Capital Markets Union, said: “Today’s decision marks another step towards making good on our G20 commitments to bolster financial stability, reduce risks and boost market confidence.”

The mandate will cover CDS derivatives that are denominated in euros covering certain European corporations.

Speaking to The TRADE Derivatives, Frank Soussan, global head of CDSClear at LCH.Clearnet, says the clearing mandate will help improve both liquidity and confidence in a market that has dramatically declined since the financial crisis.

“As soon as you clear any financial instrument, you provide transparency around pricing, valuation and flows. This is good for the market and will help improve liquidity. Clearing single names requires dealers to contribute prices which means the buy-side have a valuation for their books and their trades. This should give them confidence to engage in further trading of CDS,” says Soussan.

Trading volumes in the CDS market have surged in recent months following severe losses at some of Europe’s largest banks. In February, the volume of contracts on benchmark indexes in the market increased two-fold to an average of $87 billion a day.

However, firms are still awaiting a clearing mandate for single-name CDS to be adopted in the US. Earlier this year, hedge fund giant Citadel called for the US Securities Exchange Commission (SEC), which regulates the CDS market, to finalise a regulatory framework for single-name CDS central clearing.

“The single-name CDS market is now at a critical juncture, with liquidity and participation impaired due in part to the lack of a firm and predictable regulatory framework,” wrote Adam Cooper, chief legal officer at Citadel, in a letter to the SEC.

“The Commission should, without delay, perform a full review of all of the instruments that clearing agencies currently accept for clearing.”

The announcement from the European Commission comes after the regulatory body dropped proceedings against 13 investment banks, along with CDS data provider Markit and the International Derivatives and Swaps Association (ISDA), from allegedly preventing CME and Deutsche Bourse from entering the market.

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