French bank Bpifrance relocates clearing from LCH to Eurex in Brexit preparation

The bank has transferred its entire portfolio of derivatives composed mainly of interest rate swaps from London’s LCH to Eurex Clearing.

French investment bank Bpifrance has moved its entire portfolio of derivatives from LCH to Eurex for clearing in preparation for the UK leaving the European Union on 31 December. 

Eurex confirmed that Bpifrance had relocated its clearing busines and derivatives portfolio, comprised mainly of interest rate swaps from London’s clearing house LCH to its European central clearing counterparty.

BNP Paribas acted as a counterparty and clearing broker for Bpifrance in the transaction.

The move follows the equivalence decision from the European Commission for UK CCPs for 18 months from January earlier this year. Alongside the time-limited equivalence decision the Commission renewed its recommendation that participants reduce their exposure to UK-based CCPs, including the London Stock Exchange Group (LSEG)’s LCH.

“We are pleased that Bpifrance, a major European partially state-owned bank, chose to switch their swap book to Eurex Clearing. Our service provides clients with a liquid EU alternative to clear their interest rate swaps,” said Erik Müller, chief executive officer at Eurex Clearing. 

“The volume of long-dated interest rate swaps cleared at Eurex rose to a new record of EUR 56.5 billion (average daily volume) in November, a roughly fourfold increase over the first half of 2020.”

In November, Eurex extended its CCP Switch Incentive Programme, which waives booking fees entirely for over the counter (OTC) interest rate swaps and overnight index swaps, until June next year in a bid to entice market participants to move their derivatives clearing to Europe in preparation for the Brexit deadline.

Eurex said that since 2018 when it launched its partnership programme it had on-boarded more than 500 banks and buy-side firms for swaps clearing, raising its market share to 19% in euro-denominated OTC interest rate derivatives in terms of outstanding volume.