Eurex Expands FX Futures to Emerging Markets

Emerging Market FX Trading: Liquidity Challenges
  • New Eurex FX Futures contracts cover Brazil, Mexico, South Africa
  • Cash settlement eliminates need for new settlement infrastructure in foreign currencies

Eurex will start trading new FX Futures contracts covering Brazilian Real (BRL), Mexican Pesos (MXN) and South African Rand (ZAR) on 10 October 2022. The launch of the three most heavily traded currencies outside the G10 reinforces Eurex’s position as Europe’s leading FX liquidity hub.

In total, five new contracts will be listed covering the following Emerging Markets currency pairs: BRL/USD, MXN/USD, MXN/EUR, ZAR/USD, ZAR/EUR. An accompanying liquidity scheme will ensure tight pricing and competitive liquidity. The new contracts will be cash settled in US dollars or euros upon expiry. Therefore, clearing members can use their existing infrastructure and will not be required to open new cash accounts in these Emerging Markets currencies.

Eurex FX Futures are similar to OTC FX Forwards but have significantly lower counterparty credit risk (CCR) because financial obligations are guaranteed by Eurex Clearing as the central counterparty (CCP). In addition, given the bilateral margin requirements in OTC trading under the Uncleared Margin Rules (UMR) or the revised capital requirements under SA-CCR, centrally cleared FX Futures can offer significant benefits to customers over OTC FX Forwards in terms of margin, funding, and operations.

Jens Quiram, Global Co-Head FIC Derivatives and Repo Sales at Eurex: “We see more and more firms coming into the scope of the Uncleared Margin Rules who are looking for solutions to reduce their average aggregate notional amount and bilateral margin requirements. Listed FX Futures can address these challenges while reducing the overall risk of a portfolio due to Eurex Clearing’s multilateral netting capabilities.”

Eurex FX’s offering includes now listed FX Futures on 25 currency pairs. When calculating margins, the entire portfolio is accounted for, which leads to more efficiencies in the collateral to be deposited. Eurex also offers clearing of OTC FX Non-Deliverable Forwards (NDFs) in Asian and Latin American currencies.

Source: Eurex

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