Eurex Clears First Cross Currency Swaps
- J.P. Morgan and Morgan Stanley are the first to use Eurex Clearing’s OTC FX clearing service
- Important milestone in Deutsche Börse’s FX strategy
Eurex Clearing, one of the leading CCPs globally and part of Deutsche Börse Group, has cleared the first cross currency swap transactions. The trades were submitted by J.P. Morgan and Morgan Stanley as the first OTC FX clearing participants. Cross currency swaps are an important component of Deutsche Börse’s FX strategy, consisting of the FX offerings of Eurex, Eurex Clearing and 360T.
— Deutsche Börse Group (@DeutscheBoerse) October 24, 2019
Eurex Clearing’s OTC FX service currently offers interdealer clearing of EUR/USD and GBP/USD cross currency swaps of up to 50 years’ maturity. Eurex Clearing also clears deliverable FX spots, FX forwards and FX swaps of up to two years which are executed at 360T.
First extensions to the service are planned for 2020 with the launch of client clearing. An enhanced product suite enables clients of Eurex and 360T to benefit from portfolio effects and operational efficiencies achieved when using a single clearing house across multiple exchange-traded and OTC FX products.
Charles Bristow, Head of Rates, Fixed Income Financing and Credit Portfolio Trading, J.P. Morgan said: “Cross currency swaps play an important role in the flow of capital through the international markets. Moving to a centrally cleared model is a significant moment for the asset class as it reduces the complexity linked to large bilateral counterparty exposures, enhances resource efficiency and increases overall marketplace resilience.”
Andrew Millward, Head of Rates and FXEM for EMEA, Morgan Stanley: “We appreciate the benefits that post-trade novation of risk can bring in terms of credit and risk optimization. We are therefore happy to lead the way for cross currency and FX markets by using the Eurex FX clearing service.”
Erik Müller, Chief Executive Officer of Eurex Clearing: “With the successful completion of these first transactions, we have taken an important step in delivering greater efficiencies to the FX market. Clients will benefit from significant capital relief and cost savings when centrally clearing their OTC FX exposures. Our objective is to build a cleared FX liquidity pool over time, as further clients decide to utilize our new FX clearing services.”
Carlo Kölzer, Head of FX Deutsche Börse Group and 360T CEO: “Regulatory changes such as Uncleared Margin Rules pose a burden to our clients and OTC FX clearing helps them to cope with these challenges. The OTC FX clearing capabilities of Eurex Clearing are therefore the logical complement to the Group’s FX OTC offerings via 360TGTX and the listed FX futures at Eurex.”
Phase 5 of the uncleared margin rules (UMR) took effect from September 2021.
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.