March 17 (Bloomberg) -- Intercontinental Exchange Inc. became the first clearinghouse to back credit-default swaps by guaranteeing $7.15 billion of the contracts last week.

There were 91 transactions to clear bilateral trades in the Markit CDX North America Investment Grade Index Series 10, which is linked to the bonds of 125 companies in the U.S. and Canada. The clearinghouse, known as ICE U.S. Trust, has $3.27 billion in notional value of the cleared contracts that haven’t been closed out, known as open interest, the exchange said today in a report on its Web site.

Atlanta-based Intercontinental, also known as ICE, has beaten competitors CME Group Inc. and NYSE Euronext to be the first clearinghouse owner to guarantee trades in the $27 trillion credit-default swap market. CME Group received its final regulatory approval last week and hasn’t released a start date for its service, while NYSE has offered credit-derivative clearing since December but has processed no trades yet.

“This is what we’ve been waiting for,” said Mark Williams, a finance professor at Boston University. “Maybe this will punctuate a much more liquid market in credit-default swaps going forward.”

ICE joined with the largest banks that dominate the credit- derivatives market by paying $39 million for Clearing Corp., a Chicago clearinghouse owned by Goldman Sachs Group Inc., JPMorgan Chase & Co., UBS AG and others. The banks and ICE evenly share revenue from the new credit-default swap clearinghouse under terms of the purchase.

CDX Pricing

Prices for the CDX index are now being made public at the end of each trading day on Markit Group Ltd.’s Web site. The prices comprise the official ICE Trust settlements, according to the exchange.

Intercontinental spokeswoman Kelly Loeffler declined to comment on how much collateral, or margin, the banks had to deposit with the clearinghouse to back the $3.27 billion in open trades.

The trades being cleared by ICE are existing positions that have been catalogued by the Depository Trust & Clearing Corp. and don’t represent trades entered into today.

“This reflects the backlog in the DTCC warehouse and doesn’t reflect how vibrant the new credit-default swap traded marketplace will be,” Williams said. “Ultimately we’ll have to see where new trading will come from.”

Near Failure

U.S. and European officials are pushing plans to increase the amount of information available about the swaps after American International Group Inc., once the world’s largest insurer, almost failed from its use of the contracts. The unregulated, privately traded market hampered government efforts to assess bank credit-risk because the full range of trades between dealers was unknown.

There were a total of $373.3 billion of outstanding credit swaps linked to the CDX Series 10 index as of March 6, according to DTCC, which runs a central registry for the market. ICE’s cleared trades last week represent 2 percent of that series of index trades.

Eurex AG, Europe’s largest futures market, and LCH.Clearnet Ltd., Europe’s largest securities clearinghouse, plan to offer clearing in credit-default swaps this year.

To contact the reporter on this story: Matthew Leising in New York at mleising@bloomberg.net

Last Updated: March 17, 2009 16:50 EDT