Eurex now has a clearing license in Japan
A long time ago readers will have seen charts on this site and in Rocket magazine showing the OTC clearing volumes around the world. JSCC took a reasonable amount of JPY swap business domestically with international business being cleared at LCH. Now JSCC have Eurex alongside them, in time we'll see how volumes migrate.
Japan’s Financial Services Agency (FSA) has granted Eurex Clearing a license as a “foreign financial instruments clearing organization”. This enables Eurex’s central counterparty to offer its clearing services not only in the European Union and the U.S. but also in Japan. The service extension into one of the largest Fixed Income markets is driven by client demand and will support the strong momentum of Eurex Clearing’s EU-based liquidity pool for Euro Swaps.
With the new license, Japanese financial institutions can directly access Eurex for swap clearing and combine their listed and OTC euro yield curve business in one single place.
“It’s an honour to be granted a license for a country which is one of the largest non-EU holders of European debt instruments. I would like to express my gratitude to the Japanese FSA and its staff for supporting us in this licensing process,” says Erik Müller, CEO of Eurex Clearing. “With this step, we further geographically expand our service offering into Asia and underline our commitment to becoming the global home of the euro yield curve.”
Christopher Perkins, Global Head of OTC Clearing and Foreign Exchange Prime Brokerage at Citi: “Citi is very pleased to extend our unique and differentiated cleared swap connectivity on Eurex to the Japanese market. We look forward to working with Eurex to onboard new clients in Japan.”
Eurex Clearing has developed a strong liquidity pool for clearing euro-denominated interest rate derivatives, mainly through its partnership program launched in early 2018. This market-led initiative is designed to further accelerate the development of a liquid, EU-based alternative for the clearing of OTC interest rate derivatives. It benefits clients and the broader market place through greater choice and competition, improved price transparency as well as reduced concentration risk. Total notional outstanding of over EUR 18 trillion (end of February) keeps Eurex’s overall market share at about 18 percent.
Access to the Japanese market is a logical next step for Eurex Clearing to expand its liquidity pool. Japanese institutions are very active in European fixed income futures on Eurex and have also significant exposure in the Euro swap market. In addition, Japan is one of the largest ETD and OTC derivatives markets globally.
Outside of Japan, Eurex Clearing is recognized as a Derivatives Clearing Organization and permitted to serve clients in the U.S. under the associated LSOC model. Since recognition in February 2019, Eurex has onboarded over 20 clients with over 3,500 registered funds.