Clearing battle heats up

Matthias Graulich, Member of the Executive Board, Eurex Clearing.

Eurex, the Deutsche Boerse-owned central counterparty (CCP),  is increasing the incentives for banks to shift clearing of euro-denominated derivatives from London to its Frankfurt operation, in the latest move to win business once the UK leaves the European Union at the end of the year.

Eurex Clearing is extended the deadline of its switch incentive programme by three months until June 2021.

The programme is designed to support and encourage clearing members to transfer existing OTC interest rate swap and overnight index swap portfolios at other CCPs to Eurex Clearing.

“With the expansion of our central counterparty switch incentive programme, we want to make it easier for market participants to comply with the demands of the regulators and transfer swap business into the European Union,” a member of Eurex Clearing’s executive board, said in a statement.

The incentive package will also include a complete waiver of booking fees for OTC interest rate  and overnight index swaps as well as a “substantial fee rebate voucher” on future transactions in OTC interest rate derivatives. This new voucher rebate model will be applicable until June 2022.

Eurex said, “By switching a swaps portfolio of €250 bn, a clearing member would realise an economic benefit of up to €1.5 m.”

In addition, the CCP has renewed its discounts on its gold fee packages giving clearing members a discount of 33%, equating to a €3m saving over this three-year period.

Following the launch of the programme, Eurex has established an EU 27-based alternative liquidity pool for OTC interest rate derivatives. More than 500 banks and buy-side firms have been on-boarded for swaps clearing.

It said the market share in euro-denominated OTC interest rate derivatives in terms of outstanding volume has been continuously growing and currently stands at around 19%.

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