In the battle for supremacy in the derivatives clearing business, the ICE Trust has long been a powerhouse, especially when it came to credit default swaps, where it was the only game in town for a stretch, always staying a step ahead of the CME. But the regulatory spotlight is hot right now, and the mainstream media is taking note.

The New York Times has weighed in with a front-page article on the ICE Trust, noting that its "members share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable--and controversial--fields in finance." The members apparently meet secretly every month and "the details of their meetings, even their identities, have been strictly confidential," the Times reports. This may sound a bit lurid. But the issues are real, the profits at stake are massive.

The ICE Trust is owned in part by big-name Wall Street dealers, the likes of JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America, Credit Suisse and Citigroup. Deutsche Bank is the leader. These banks essentially control the IC, and are hugely powerful when it comes to OTC derivatives clearing, a profitable market.

We've long suggested over on FierceFinanceIT that the ICE attracted meaningful CDS volume in part because the member dealers had every reason to push order flow to the Atlanta-based clearinghouse. It's only normal for such entities to want to preserve power and profits. But those who have  been rebuffed understand the political climate may be working in their favor.

Consider the Bank of New York Mellon. It has been trying to become a so-called clearing member since early this year, the Times notes. "But three of the four main clearinghouses told the bank that its derivatives operation has too little capital, and thus potentially poses too much risk to the overall market"--a notion the company angrily disputes.

Many hope the on-going Dodd-Frank rulemaking effort will address transparency in derivatives clearing market.

For more:
- here's the article

Related Articles:
Nasdaq OMX to clear interest rates swaps?
Clearinghouse ownership caps a blow to dealers?
Swap execution facilities to storm the industry
ICE making inroads in CDS clearing race