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The Creature Fails: Swap Users Won't Accept Fed Clearinghouse Target

“There’s still quite a bit of legislative and regulatory maneuvering before we are left with a standardized clearing mechanism,” Yelvington said. “They don’t know six months, nine months down the road what it’s going to look like. So if they commit to something now, they essentially commit in a vacuum.” BlueMountain pushed in June for more access to clearinghouses so hedge funds could have the same protections that banks are afforded. “The dealer community may be filibustering to protect its oligopoly and not seriously engaged in working with the buy side to develop a clearing solution,” Samuel Cole, the chief operating officer at New York-based BlueMountain, the hedge fund whose founders helped pioneer credit-default swaps, said in a June 1 letter to banks. Now, some firms may be having second thoughts, said Kevin McPartland, a senior analyst at Tabb Group in New York. “They want the ability, but on the other hand, they don’t want to be forced” to clear credit swaps, he said.

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