LSEG and Deutsche Boerse to launch joint portfolio margining service

The service will allow cross-margining of interest rate swaps cleared at LCH and European rates futures cleared at Eurex.

Deutsche Boerse and the London Stock Exchange Group (LSEG) will launch a joint portfolio margining service for OTC and listed derivatives, after the two exchange groups agreed on a £20 billion merger.

The move will also mean Deutsche Boerse’s Eurex and Eurex Clearing will adopt the non-discriminatory open access provisions set out in MiFID II.

“We plan to develop a portfolio margining service between OTC and listed rates derivatives clearing markets, providing significant customer benefits for margin relief and cost of capital savings,” said Carsten Kengeter, CEO of Deutsche Boerse, on a conference call.

The portfolio margining service is subject to regulatory approval.

LSE’s swaps clearing business, LCH.Clearnet, is the largest clearer of interest rate swaps in the world, while Eurex offers clearing in highly liquid European interest rate futures. The Combined Group will bring together both clearing houses, which hold combined margin pools of around €150 billion, under one roof.

The merger of the two exchange groups, which is expected to close in the first quarter of next year, spells changes in the clearing model for Eurex, which has been previously based on a vertical clearing model.

“The Combined Group will meet the non-discriminatory open access provisions across all relevant businesses, in forthcoming European regulations,” Kengeter added.