Eurex has outlined a medium-term plan, putting expansion into Asia and the growth of its OTC clearing business at the forefront of its ambitions.
The German exchange said it is in ‘advanced talks’ with regulators in Singapore to launch its clearing house, while cross-listing and market data deals with Asian exchanges are also on the horizon.
“The focus of many exchanges has been Europe,” said Eric Müller, member of the executive board at Eurex Clearing, pointing to the organic growth of CME and ICE’s acquisition of NYSE Euronext. “For us now is the opportune time to focus efforts on growth in Asia.”
Last year, ICE completed its acquisition of NYSE Euronext and spun off the Euronext part of the business early this year to focus its European operations on the London-based Liffe exchange. CME also launched a derivatives and commodities exchange in Europe this year. Additionally, ICE has been working to relaunch the Singapore Mercantile Exchange and its associated clearing house that it acquired in 2013, highlighting the strategic importance for global exchange groups to move into the Asian market.
“We are working on a CCP in Singapore, right now we are in a consultation phase. We have a number of very interesting dialogues in the region around indexes.”
Regulations pushing swaps towards central clearing have made the OTC derivatives clearing business lucrative for Europe’s central counterparties (CCP).
Eurex believes its existing interest rate swap futures and OTC clearing capabilities will present margin offset opportunities to the buy-side.
The exchange is aiming to win 25% of dealer to client business in interest rate clearing by 2017, and hopes to earn €50-100 million in revenues over that time.
“We expect a bigger wave of uptake in the first half of next year,” said Thomas Book, CEO of Eurex Clearing. “The impact can be huge, there are portfolios which could save 70-80% of their margin costs.
The exchange said real momentum will take place when SunGard, its software partner, roll out its services in the first half of 2015.