Eurex launches OTC clearing incentive scheme for buy-side

Eurex hopes to attract buy-side firms for its interest rate swaps clearing business. 

Eurex has launched a new fee incentive programme for its OTC derivatives clearing business in a bid to attract buy-side customers. 

The scheme will provide “registered customers”, including buy-side firms, a waiver from booking and maintenance fees until 30 September.

For member-firms that hold a total notional outstanding volume in excess of EUR250 million, they will receive a full fee waiver until 31 December. For companies with a total notional volume in excess of EUR1 billion, they will be charged no booking fees under 30 June 2017.

EurexOTC Clear is a relatively new clearing house in Europe, as it looks to challenge the dominance of LCH in the euro-denominated swaps clearing space.

However, as a result of the Brexit, questions over LCH’s euro swaps clearing business and its location in London have arisen.

Incentive schemes in market making are a useful tool exchanges deploy to drum up activity. Yet fee waivers from clearing houses are relatively new. CME Clearing Europe offered a similar fee waiver in 2014 when it launched an interest rate swaps clearing service.

On the other hand, incentive schemes do not guarantee activity, as shown with the experience of Nasdaq NLX.

While the cost of clearing will be a predominant theme for buy-side firms in where to clear, one asset manager believes incentive schemes would not be a determinant when selecting a CCP.

“I would be more concerned with the products they clear, the access to the CCP provided by my clearing member(s), the strength of the segregation model in terms of legal opinions to support what occurs in the event of a default, robust risk measurement and default management processes, CCP liquidity is also key,” the asset manager says.

“I would not want to be clearing at a CCP that attracts a basis point add on due to my counterparty not wishing to clear there. Fee incentive schemes are a nice to have but feature very low on my list of priorities.”