The NYSE Euronext and the Depository Trust & Clearing Corporation announced they have finalized their agreement to create a new derivatives clearing joint venture, the organizations said Tuesday.

The firms have filed an application for their JV, known as New York Portfolio Clearing, to be granted status as a derivative clearing organization with the Commodity Futures Trading Commission; and draft amendments to the rules of DTCC’s Fixed Income Clearing Corporation are expected to be circulated to the CFTC and Securities and Exchange Commission, respectively, in the coming weeks. The NYPC is expected to be operational in the second quarter of 2010, pending regulatory approval.

The firms said that the NYPC has the potential to provide capital relief to the industry, while opening the U.S. futures market to new competition. It will foster competition in the U.S. futures market by clearing trades from multiple qualifying trading platforms and clearing organizations. “By margining cash and derivatives markets in a ‘single pot’, rather than through existing cross-margining agreements, NYPC will be the first to bring together cash positions and their natural derivatives hedge in an open manner designed to substantially improve both operational and capital efficiency,” they explained. It will also increase transparency by giving regulators a more comprehensive tool to manage and mitigate systemic risk across asset classes.

“Through our open access model, DTCC intends to support competition in the U.S. futures markets. By extending the unique NYPC risk methodology to multiple markets and products, we will offer our unique capital efficiencies to a wide range of customers and market participants,” said Murray Pozmanter, DTCC managing director, Fixed Income Clearance and Settlement Group.

The NYPC will be a 50/50 joint venture between NYSE Euronext and DTCC. NYSE Euronext plans to commit a $50 million financial guarantee as an additional contribution to reinforce the safety and soundness of the NYPC default fund. Pending required regulatory approvals, NYPC initially plans to clear interest rate products traded on NYSE Liffe U.S.

IE