CME Group is launching the derivatives industry’s first-ever sustainable clearing service on 27 September to help market participants track and report on how their hedging activities are advancing their sustainability goals.
The exchange group said clearing brokers will be able to offer visibility to their clients such as asset managers to help them monitor the sustainability performance of their various clearing brokers.
Sustainable derivatives encompass both the trading products such as carbon offsets, battery metals and bioenergy, as well as interest rate and foreign exchange futures hedging activity to support a sustainable business.
Participating futures commission merchants will be provided with sustainable clearing eligibility criteria to identify and tag their sustainable trades.
The criteria will be aligned to external standards, like the International Capital Markets Association Social & Green Bond Principles.
“Sustainability continues to be an increasing priority for our global clients as they significantly expand both the risk management that they provide to green businesses and environmental projects,” said Julie Winkler, Chief Commercial Officer, CME Group.
She added, “This new framework for clearing sustainable derivatives will make it easier for our clients to measure the impact of their support for sustainable activities and can be part of the solution to encourage further growth in this key sector as the economy transitions to net-zero emissions.”
Sunil Cutinho, President, CME Clearing, noted that the “clearing offering makes it simple for firms to track their sustainable derivatives positions by seamlessly integrating reporting into their existing workflows
Our solution ensures that all sustainable trades continue to benefit from our established risk management approach, including full margin offsets where applicable, which creates efficiencies for clients and end users.”
CME said the clearing service was developed in response to banks wanting to test their sustainable credentials against an external, objective benchmark.
It said a handful of banks, including BNP Paribas and Standard Chartered, worked with the CME clearing house to develop and test the new clearing service.
“As the bank for a changing world, we consider it our duty to assist our clients in reaching their sustainable related goals through the Sustainable Clearing service,” said Raphael Masgnaux, Global Head of Prime Solutions and Financing and G10 Rates, BNP Paribas.
Mick Hill, Global Product Owner, Exchange Traded Derivatives, Standard Chartered Bank, commented, “As a firm believer in how finance can catalyse a positive impact on our environment, Standard Chartered is delighted to have contributed to CME’s Sustainable Clearing solution and support the sustainable agenda of market participants.”
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