Eurex: ISA Direct Gaining Traction
- Raiffeisenlandesbank Niederösterreich-Wien AG first EU-domiciled bank to join Eurex’s ISA Direct as basic clearing member
- ABN AMRO Clearing acting as clearing agent
Eurex Clearing’s direct access model for the buy side – ISA Direct – is gaining traction as it welcomes its first EU-domiciled bank as a member. Raiffeisenlandesbank Niederösterreich-Wien AG (RLB NÖ-Wien) recently became a direct clearing member of the central counterparty’s ISA Direct service, with ABN AMRO acting as clearing agent.
Benefits of direct CCP access for #BuySide firms: @SwissLife_AM uses #EurexClearing’s ISA Direct to clear OTC #InterestRate swaps with @ABNAMROClearing as #clearing agent. In our video, experts from the three firms discuss advantages of the direct access model. pic.twitter.com/8Mal4dYkTA
— Eurex (@EurexGroup) November 12, 2019
ISA Direct brings together elements of the traditional client clearing service relationship with direct access for the buy side, allowing a new principal-client relationship between these market participants and the CCP. The addition of RLB NÖ-Wien to the program comes after Swiss Life Asset Managers and PGGM, the Dutch pension fund, both joined ISA Direct earlier this year. There are now eight basic clearing members and four agents live on OTC IRS and Repo.
Banks are facing more onerous capital requirements, which have sometimes led to higher fees and wider spreads in the clearing space. There is also an increasing industry awareness around clearing costs and risk concentration. In this context, Eurex brought ISA Direct to market to support both the buy and sell sides in addressing these concerns. While buy side and smaller market participants previously had to use clearing brokers to intermediate with their clearing house, ISA Direct now allows these firms to face Eurex Clearing directly. Within this framework, a clearing agent deals with obligations such as default management, as well as possibly offering further services such as transaction or collateral management.
“Having a direct relationship with Eurex Clearing provides us with a range of advantages in terms of both costs and collateral management,” says Jochen Bonk, Head of Fixed Income Management at RLB NÖ-Wien. “Alongside lower fees, we can now make use of a much wider variety of collateral compared to our previous arrangements with intermediaries. Improving the portability of our assets in this way has opened up significant capital and operational efficiencies.”
With ABN AMRO acting as clearing agent, RLB NÖ-Wien’s relationship with Eurex is supported by a market-leading clearing provider with a track record of supporting innovation in the clearing space.
“We are very happy to partner with RLB NÖ-Wien,” says Alexander Jacobs, Head of OTC Clearing at ABN Amro Clearing.
“Acting as clearing agent, rather than as the clearing member, optimizes the impact on our balance sheet and creates opportunities to further expand our central clearing services.”
Philip Simons, Global Head of Sales, Fixed Income at Eurex says: “The onboarding of our first EU-domiciled bank, RLB NÖ-Wien, to ISA Direct demonstrates the widening adoption of this innovative solution. This confirms its utility to a broad range of market participants including both the buy side and the sell side. With the ongoing support of globally leading players like ABN AMRO Clearing, we are looking forward to welcoming additional clients who are currently onboarding.”
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