CDSClear Has Record Month Across European And US Products
Morgan Stanley has connected to CDSClear to offer clients clearing of credit derivatives as LCH, the clearing arm of the London Stock Exchange, had record volumes in the first half of this year.
LCH said yesterday that Morgan Stanley has become the latest clearing broker to connect to CDSClear.
— LCH (@LCH_Clearing) July 15, 2019
Mark Bortnik, European head of derivatives clearing at Morgan Stanley, said in a statement: “As an increasing number of our clients either become mandated or look to clear credit derivatives, it’s important that we are able to offer them the broadest range of products. ”
CDSClear had 132 new client accounts that went live in the first half of this year, taking the total of live clients to 149 at the end of last month.
— LCH (@LCH_Clearing) July 9, 2019
Frank Soussan, global head of CDSClear, said in a statement: “2019 has been an exceptional year for us so far in terms of growing client participation and volumes, and we look forward to continuing this growth trajectory over the coming months.”
LCH’s SwapClear also cleared record volumes in the first six months of this year.
H1 2019 was a record half-year for total clearing volumes at #SwapClear with $660 trn notional cleared (+15% from H1 2018)
— LCH (@LCH_Clearing) July 9, 2019
Chris Turner, analyst at German bank Berenberg, said in a report in May that LCH is in “robust health” despite the possible threat to the business as the UK leaves the European Union.
Turner said in report: “LSE is a play on two key structural growth themes: secular growth in clearing and increased adoption of quantitative investment approaches. The group’s first-quarter results suggest that the former is in robust health, while the latter is more likely to deliver high single-digit revenue growth than the low double-digit growth we had hoped for.”
The London Stock Exchange Group reported in its first quarter results that income at LCH was up 17% to £182m ($238m). The exchange said in its results statement: “There was no discernible change to customers’ use of the service as equivalence secured in event of hard Brexit.”
Last month Eurex Clearing said ISA Direct, a direct clearing membership for the buy side to clear interest rate swaps and repos, was gaining traction.
#EurexClearing’s ISA Direct gains traction: we welcome @SwissLife_AM as the first #BuySide client using our ISA Direct service for OTC #InterestRate #derivatives with @ABNAMROclearing acting as #clearing agent. https://t.co/8i3HZLjw3z pic.twitter.com/YW82NwiU7i
— Eurex (@EurexGroup) June 25, 2019
Eurex, owned by Germany’s Deutsche Börse, developed ISA Direct as increased capital requirements for banks has made clearing more expensive to provide, resulting in higher client fees or firms withdrawing clearing services. Under ISA Direct, buy-side firms connect directly to Eurex Clearing as a counterpart, instead of going through a clearing member, whilst maintaining legal and beneficial ownership of any securities collateral provided.
Jan Grunow, head of operations at Swiss Life Asset Managers, said in a statement: “By being able to directly connect to Eurex Clearing, our concerns about credit risk and the portability of our assets are much better addressed. The ISA Direct model alleviates many of our concerns and helps us to meet the regulatory requirement of central clearing.”
Another advantage of ISA Direct is that it results in a lower balance sheet impact for banks.
Alexander Jacobs, head of OTC clearing at ABN AMRO Clearing, said in a statement: “The ISA Direct set up offers capital, operational and risk efficiencies for all parties including novel collateral management solutions.”
Last month Barclays also became the first European bank to offer Eurex’s OTC clearing services through its US registered futures commission merchant to US clients.
Growing globally: @Barclays has joined EurexOTC Clear to support us in expanding our #distribution network in the U.S., thus becoming the first European bank to offer our OTC #clearing services through its U.S. registered FCM to U.S. clients. https://t.co/CB3x2CKIWM pic.twitter.com/YmMi6DenVg
— Eurex (@EurexGroup) June 13, 2019
Citi was the first US-based FCM to offering its clients swap clearing through Eurex Clearing in the first quarter of this year.
Tim Gits, head of fixed income sales Americas at Eurex, said in a statement: “The growth we have seen from US institutions since receiving CFTC approval in late 2018 has been very encouraging, and the number of FCMs and clients in the pipeline is very promising.”
The Commodity Futures Trading Commission authorised Eurex Clearing to offer customer swap clearing in the US in addition to the clearing services for futures in December last year.
Temporary equivalence is set to expire on June 30 2022.
IRS trading volumes have fragmented without an equivalence agreement.
Phase 5 of the uncleared margin rules came into effect on 1 September.
Triparty repos can be executed across U.S. Treasury securities to central clearing.
CEDX opened on 6 September, offering contracts on Cboe Europe single country and pan-European indices.