Eurex geared for euro swaps clearing ruling

Eurex is expecting a rise in demand for continental-euro derivatives clearing services, with an EU ruling imminent. 

Frankfurt-based Eurex is seeing a rise in demand for euro-denominated derivatives clearing, as a decision from Brussels on the future of the lucrative business looms near.

For euro-denominated interest rate swaps, Eurex Clearing, operated by Deutsche Boerse, is seeing greater demand for swaps clearing solutions based in continental Europe from banks and asset managers, it said on its quarterly earnings call.

“We have a very function-ready model out there that’s based on very solid and state-of-the-art technology and risk management systems and now, obviously, with the uncertainty delivered by the exit of the UK, there is a lot of demand that we are getting for continental European clearing solutions,” said Eric Muller, CEO, Eurex Clearing.

Eurex is planning to go live with a new OTC FX clearing solution, introducing clearing services for swaps, spots and forwards on two currency pairings.

According to reports from the Financial Times and Reuters, the European Commission is seeking to rush out a proposal which will see greater EU control on UK derivatives clearing operations. This could mean UK operators either relocating to Europe, or accepting EU oversight.

A draft policy communication, seen by the FT, supports “more centralisation of supervision” of clearing houses.

The proposal will reverse a ruling from the European Court of Justice in 2015, which denied the European Central Bank (ECB) in enforcing a “location policy” for UK clearing houses.

In spite of the uncertainties created by Brexit the London Stock Exchange’s LCH, which operates the world’s largest interest rate swaps clearer, is seeing little slowdown.

Last week, LCH saw revenues increase by 31% in the first quarter, with 27% revenue growth in OTC clearing from higher SwapClear trades.