Eurex Welcomes OTC Clearing Member

Terry Flanagan

Eurex Clearing, Europe’s leading clearing house, has revealed that with the addition DZ Bank as a new member of EurexOTC Clear for Interest Rate Swaps (IRS), the number of clearing members on EurexOTC Clear now stands at 15. In addition to serving major group companies and affiliates, DZ Bank will offer its services to other interested clients as well.

“Participation in EurexOTC Clear is a strategic decision for DZ Bank. With Eurex Clearing’s services, we can also expand and enhance our range of services as a clearing broker for banks and institutional clients,” said Lars Hille, member of the Board of Managing Directors of DZ Bank AG.

EurexOTC Clear for Interest Rate Swaps, which was launched in November 2012, offers fully integrated clearing and collateralization of OTC transactions and listed derivatives in a single clearing house and under one legal framework.

“We are very pleased to welcome DZ Bank as a new user of our EurexOTC Clear offering, as this Volksbanken Raiffeisenbanken cooperative financial network is an important pillar in the German banking system. This confirms the attractiveness of our offering,” said Thomas Book, CEO of Eurex Clearing.

Eurex Clearing’s members and their clients benefit from capital efficiency via portfolio margining of listed and OTC transactions alike (cross-margining) as well as a wide range of eligible collateral compared to other CCPs. There are also a variety of segregation solutions, including an Individual Clearing Model that offers maximum protection of client assets and full portability of their positions and collateral.

Separately, the Basel Committee on Banking Supervision and the International Organization of Securities Commissions (Iosco) have issued the final framework for margin requirements for non-centrally cleared derivatives.

Under the globally agreed standards, all financial firms and systemically important non-financial entities that engage in non-centrally cleared derivatives will have to exchange initial and variation margin commensurate with the counterparty risks arising from such transactions.

The framework has been designed to reduce systemic risks related to over-the-counter (OTC) derivatives markets, as well as to provide firms with appropriate incentives for central clearing while managing the overall liquidity impact of the requirements.

The framework exempts physically settled foreign exchange (FX) forwards and swaps from initial margin requirements. Variation margin on these derivatives should be exchanged in accordance with standards developed after considering the Basel Committee supervisory guidance for managing settlement risk in FX transactions.

The framework also exempts from initial margin requirements the fixed, physically settled FX transactions that are associated with the exchange of principal of cross-currency swaps. However, the variation margin requirements that are described in the framework apply to all components of cross-currency swaps.

It envisages a gradual phase-in period to provide market participants with sufficient time to adjust to the requirements. The requirement to collect and post initial margin on non-centrally cleared trades will be phased in over a four-year period, beginning in December 2015 with the largest, most active and most systemically important derivatives market participants.

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