NYSE Euronext and The Depository Trust & Clearing Corporation announced Thursday the creation of a joint venture for clearing U.S. fixed income derivatives.

The new clearing house, New York Portfolio Clearing, will combine NYSE Liffe U.S. and DTCC’s Fixed Income Clearing Corp. to offer clearing and settlement for U.S. fixed income securities and derivatives. The initiative, which has been approved by the boards of both companies, is expected to be operational in the second quarter of 2010, subject to definitive documentation and regulatory approval.

Under the agreement for a 50-50 joint venture, the NYPC will initially clear interest rate products traded on NYSE Liffe, and will be able to add other exchanges in the future. It will be powered by NYSE Euronext’s clearing technology. DTCC will contribute FICC’s capabilities in risk management, settlement, banking and reference data systems.

“Recent market dislocation has underscored the need to improve market efficiencies and provide more thorough and timely information about the positions of participants across asset classes,” said Duncan Niederauer, CEO of NYSE Euronext. “In uniting NYSE Euronext’s proven strength and expertise in execution with DTCC’s market-leading clearing capabilities, we will help to lower the traditional barriers between the cash and derivatives markets. NYPC will provide a more comprehensive view of participants’ overall risk exposure and increases capital efficiency through a cross-asset class risk management program.”

“Partnering with one of the world’s largest and most liquid exchange groups to create NYPC is a significant milestone in DTCC’s mission to mitigate risk and safeguard the integrity of the U.S. financial system,” added Donald Donahue, chairman and CEO of DTCC. “By providing greater transparency of investment positions between cash and derivatives, NYPC will bring a superior match between traders’ total portfolio risk and the underlying margin requirements. Additionally, regulators will gain the ability to monitor market participants’ total exposure across multiple interest rate asset classes in real-time.”

IE