Intercontinental Exchange Is Now Clear To Clear CDS Trades

The Federal Reserve Board has approved the proposal of Atlanta-based Intercontinental Exchange (ICE) to be CDS clearinghouse. The SEC is expected to follow promptly in its approval as well. As counterparty risk is thus set to be eliminated, CDS spreads will likely widen dramatically and the CDS basis trade will collapse over the next few months as CDS and bond spread converge.