WASHINGTON - A centralized swaps depository that is being launched by the Chicago Mercantile Exchange along with two other organizations may provide an added safeguard for participants in over-the-counter derivatives transactions, including, state and local governments.

"What we are attempting to do here is to create an agency that will harmonize and rationalize the whole process and put a lot of people at ease that are presently not at ease," said Chicago Mercantile Exchange chairman Jack Sandner.

The mercantile exchange, SunGard, Capital Markets, and the Society of Worldwide Interbank Financial Telecommunications, plan to complete in about nine months the depository for the over-the-counter derivatives transactions.

"The CME depository will automate what is currently a highly labor-intensive process," Sandner said. "For commercial and investment banking, this is as profound a change as was computerization for the telephone companies and airline industry."

The depository will receive and accept swaps transactions from commercial and investment banks, mark them to market, and report positions on collateral held for member banks.

The collateral stored at the depository will minimize credit risk between the swap counterparties in an environment in which collateral increasingly has become a requirement of any swaps transaction, the exchange said.

Sandner said lawmakers, including Rep. Jim Leach, an Iowa Republican and incoming chairman of the House Banking Committee, and regulators have applauded the effort.

He said that big swap dealers are "very much in favor" of the plan. However, none of the dealers has committed yet to participating in the swaps collateral depository.

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