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BAML Launches Global Futures and Derivatives Clearing Services

Bank of America Merrill Lynch is the latest bank to launch a global futures and derivatives clearing services (GFDCS) group in anticipation of demand for OTC derivatives clearing in the wake of regulatory reforms.

The bank will not clear trades itself but will use its status as a clearing member to help clients clear trades through clearinghouses such as LCH.Clearnet for interest rate swaps, or ICE Trust, a unit of the Intercontinental Exchange, for credit default swaps.

GFDCS will provide agent-clearing services for rates, currencies, credit, equities and commodity derivatives and operate as part of the bank’s global markets financing and futures (GMF&F) business, which includes prime brokerage and services.

Bob Burke and Gonzalo Chocano have been named co-heads of the GFDCS group, reporting to Denis Manelski and Syl Chackman, co-heads of GMF&F.

The move comes as regulators around the world prepare to direct more derivatives trades toward electronic trading platforms and clearinghouses as part of an overhaul of the $615 trillion market that is largely traded away from exchanges.

“Establishing an industry-leading derivatives clearing service is a top priority for our global markets business. Every client we serve will be impacted by the financial reforms transforming the OTC derivatives market,” says Thomas Montag, president of global banking and markets. “We are committing considerable resources to all areas of the business to ensure our client clearing services are best-in-class.”

The launch of the GFDCS platform follows a year long planning effort by the bank, including feedback from more than 3,000 clients who have attended educational seminars and one-on-one briefings.

Other firms that have launched OTC derivative clearing businesses include Goldman Sachs (Squawkbox, 2 August) and BNY Mellon (Squawkbox, 28 June).

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