Investment banks BNP Paribas, UniCredit and Societe Generale were among the first market participants to clear inflation swaps through Eurex Clearing.
Eurex confirmed in a statement it has cleared its first inflation swap transactions, which are commonly linked to consumer price indexes, with the initial trades submitted by BNP Paribas, UniCredit and Societe Generale.
Inflation swaps are used to transfer risk of inflation from one party to another through an exchange of cash flows. One party pays a fixed rate cash flow on a notional As one party pays a fixed rate cash flow on a notional principal amount, and the other party pays a floating rate linked to an inflation index.
“As a leader on inflation products we are very happy to be among the first to clear inflation swap trades on Eurex Clearing. Contributing to the development of a new liquidity pool and broadening our offering will be beneficial to our client base and to the market as a whole,” said Mohamed Braham, head of trading for fixed income and currencies at Societe Generale.
Eurex added that the execution and clearing of the inflation swaps reflects commitment from banks globally to meet demand for increased access to over the counter (OTC) products. Banks and buy-side clients are also attempting to distribute their portfolios more widely across clearing houses based on risk and cost.
“Having these major international banks clear their first trades on our platform is a great first step for this product. It shows clear support for our efforts to build an alternative EU27-based liquidity pool. And it further underlines our goal of becoming the global home of the euro yield curve,” said Danny Chart, head of OTC product and clearing business development at Eurex.