Bank of America Corp. said Thursday that its Merrill Lynch unit has started a division to handle customers' futures and derivatives trading.
The division is being established as regulators in the United States and Europe prepare to direct more derivatives trades toward electronic trading platforms and clearing houses in an overhaul of a $615 trillion market that is largely traded away from financial exchanges.
Wall Street banks are trying to maintain their dominance in the business. Goldman Sachs Group Inc., another major dealer of over-the-counter derivatives, in July announced a move similar to Bank of America Merrill's.
Bob Burke and Gonzalo Chocano were named to lead Bank of America Merrill Lynch's expanded derivatives effort, which will build off its existing business in futures trading.
Clearing services will be offered for derivatives tied to interest rates, currencies, credit, equities and commodities, according to the company.
The division will run as part of the bank's global markets financing and futures group, which also handles prime brokerage.
A host of exchange and clearing house operators have come out with new clearing services for complex derivatives products like credit default swaps, with the support of regulators who have targeted over-the-counter markets for intensifying the 2008 financial crisis.
Under the Dodd-Frank Act, signed into law in July, transactions in standardized OTC derivatives must be routed through clearing houses, which collect collateral to guarantee trades.
Dealer banks already have moved to clear the OTC transactions they do with one another, which represents the majority of the market.
With the passage of new rules for the market in the United States, and Europe expected to follow suit, dealers now are competing to offer clearing services for customers trading in over-the-counter markets, such as hedge funds and insurance companies.
Barclays PLC this month shifted $200 billion in interest rate swap trades held by an Italian bank customer into a clearing house run by LCH.Clearnet.
Deutsche Bank AG last spring said it cleared its first client business in similar contracts that were executed through the bank's electronic platform and cleared through LCH.Clearnet.
The dealers are also facing competition from smaller brokers that see the new rules as way to break the dealer banks' grip on over-the-counter derivatives business.
The Futures brokerage Newedge USA LLC last week said that it cleared more than $100 million in interest rate swap deals through a service developed by the exchange company Nasdaq OMX Group Inc.
