JSCC Announces Plans to Build CCP for OTC Derivatives

Japan Securities Clearing Corporation (JSCC) is planning to develop a central clearing counterparty for interest rate swaps and credit default swaps.

The JSCC and the Tokyo Stock Exchange have set up a working group to put together a detailed design for CCP functionality for managing risk in OTC derivatives trading.

In March a special study was released on post-trade processing of OTC derivatives trades. The study concluded that the JSCC should coordinate operational procedures such as the establishment of robust risk management processes, IT systems and business analysis with a clearing service to be launched in the first half of 2010.

According a statement from the study group, “In accordance with the current common practice of using the CCP function of LCH.Clearnet's SwapClear for interest-rate swap trading by foreign financial institutions, the opinion was expressed that cooperation with LCH.Clearnet would be required when a clearing institution in Japan is introduced for the clearing of interest-rate swap trading.”

The JSCC has said it will work with foreign clearing operators active in Japan.