May 31, 2012

Eurex OTC Clearing Services – Full update

On Monday 21st Eurex provided an update on the details of their plans to move into OTC clearing. Highlights were:

  1. Timing (page 7 in the PDF below)

    • Technical readiness at end of March 2012 (so now): You could login to a test environment and experience the whole system
    • Production readiness at end of June: To include IRS, OIS, FRAs
    • Upgrade by end of 2012: securities for VM, feed to trade repository, zero coupon swaps, more currencies, TriOptima integration
    • Upgrade in 2013: cross margining between OTC and ETD, more products. Have a look at page 22 onwards for examples of the IM savings when offsetting OTC and ETD.
  2. Full Individual Client Segregation (ICS), should you want it. Page 28 in the PDF
  3. Eurex Clearing OTC offering

    • Planned OTC equity derivatives: Total return and variance swaps and other option structures on EURO STOXX 50®, DAX®, SMI® and individual equities
    • Planned OTC interest rate derivatives: IRS – fixed versus floating, basis, OIS and FRA’s European currencies – EUR, GBP, CHF, SEK, NOK, DKK, PLN and other – USD
  4. Connectivity to MarkitSERV or Bloomberg VCON

A solution allowing securities to be posted against VM would be good for the buy-side, but poses at least one problem: What if the receiving party doesn't accept this approach? Maybe this only works for pairs of firms who agree to see their VM covered by securities. I assume this also means there would be no PAI in this situation, as no cash is moving, so no P&L effect of receiving cash. And most interesting is that I was told to expect announcements about support for these new services from the sell-side, soon. Full details in this PDF, kindly supplied by and in agreement with Eurex. Full contact details are on the second to last page for you to sign up ;-) Is anyone testing their solution? Will this service be the beneficiary of the European Commission's desire to see EUR products cleared on-shore in Europe?

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