Yesterday, fifteen global over-the-counter (OTC) derivatives dealers submitted a letter to the Federal Reserve Bank of New York (FRBNY), affirming their commitment to increase their usage of central counterparties (CCPs) for clearing and setting initial target performance levels to achieve such commitments.

For interest rate derivatives, the dealers committed to begin clearing 90% of new eligible trades individually, and 60% of historical trades collectively, by December 2009. For credit default swaps, the dealers committed to begin clearing 95% of new eligible trades individually, and 80% of all eligible trades collectively, by next month. Additionally, the dealers committed to issuing performance metrics that will address new transactions and the outstanding trade population on a monthly basis, the first report of which will be released next month. Finally, the dealers committed to actively working with CCPs and global regulators to expand both the set of derivatives products eligible for clearing, and the set of counterparties eligible to clear at each eligible CCP.

These commitments follow the commitments issued by the dealers in June to reduce systemic risk and increase efficiency in the OTC market through the expansion of use of CCPs to clear OTC derivatives.