Basis Swaps (or IRS Switches) between pairs of CCPs are increasing in volume.

CCP IRS Switches (or Basis Swaps) – where a counterparty pays, for example, a fixed rate on an IRS cleared on one CCP versus receiving a fixed rate cleared by another CCP are seeing significant activity post the introduction of mandatory OTC Clearing in the US as Banks seek to minimise capital held at CCPs, in the way of Intial Margin and Default Fund contributions and to reduce capital regulatory requirements. Switching to EurexOTC Clear with Default Fund contributions being 7% of IM due to an integrated Default Fund structure across asset classes which reduces risk due to portfolio diversification effects – compared to a silo'd CCP Default Fund structure with a Default Fund contibution of 10% of Intial Margin requirements and Cross Margining of Listed and OTC Products, gives the Sell Side significant savings – see below.