Back to gold, for clearing purposes

LONDON | This tells investors something about the scarcity of cash and quality assets to support compensation activity outside the regulated stock markets: from Friday CME Clearing Europe, the London-based clearing house owned by CME Group, has extended the range of eligible collateral types to include gold bullion.

It is supposed to make it easier for holders of financial derivative products to offload their portfolios, and so prospective buyers would be more willing to take on risks, too. Government regulators in Europe are pushing for complex derivatives to be cleared, as fears over this market value may be playing a role in the lack of credit flows.

“The extension offers additional flexibility at a time when high quality collateral is at a premium and the clearing of over-the-counter derivatives is increasing,” the platform explained in a press release.

CME Clearing Europe followed today the lead of CME Clearing, which has accepted gold to cover margin requirements since October 2009. Launched in May 2011, CME Clearing Europe currently clears over-the-counter commodity derivatives and also plans, subject to regulatory approval, to introduce over-the-counter interest rate swap clearing later this year.