Eurex Clears First Swap For US End Clients
Eurex Clearing, one of the world’s leading central counterparties (CCP), has cleared its first swap transaction for end clients domiciled in the U.S. Citi is the first futures commission merchant (FCM) offering client swap clearing through Eurex Clearing. Eight fund companies have already joined Citi to take advantage of this service.
An important milestone in the expansion of our U.S. distribution: @Citi is the first FCM offering client swap #clearing through #EurexClearing. Eight fund companies have already joined Citi to take advantage of this service. https://t.co/7ub8oE8XIm pic.twitter.com/3dff28BR8i
— Eurex (@EurexGroup) February 13, 2019
The transaction is the next important milestone in Eurex’s strategy to expand its U.S. distribution. As recently as December 2018, the CCP received approval from the Commodity Futures Trading Commission (CFTC) to offer customer swap clearing in addition to the clearing services for futures already provided.
In this context, Eurex Clearing had launched a refined legal framework that complies with the LSOC (Legally Segregated Operationally Commingled) requirements stipulated by the CFTC for the clearing of customer swap transactions.
Tim Gits, Head of Fixed Income Sales Americas at Eurex: “Legal recognition was a prerequisite for offering U.S.-based customers an alternative for swap clearing. We are pleased that Citi is the first FCM to successfully connect several fund companies which are now filling this model with business.”
Mariam Rafi, North American Head of OTC Clearing at Citi: “Citi is pleased to pioneer FCM connectivity and to partner with Eurex on the launch of the LSOC model. Providing this solution responds to our clients’ desire to access new liquidity venues for euro interest rates. Citi is proud to offer our clients agnostic clearing connectivity to support their evolving business needs.”
As much as 50% of the market could be cleared.
The posting of initial and variation margin reduces counterparty credit risk.
Post-crisis regulation has pushed markets toward centralised clearing.
The clearing house aims to increase operational efficiency as it experiences growth across asset classes.
Supervisors should focus on continued implementation of agreed principles for the clearing ecosystem.