MARKET INFRASTRUCTURE

OTC clearing revenues hit by regulatory delays says Deutsche Boerse chief

Delays to the central clearing mandate for category three firms have harmed clearing revenues at Deutsche Boerse.

By Joe Parsons joe.parsons@strategic-i.com February 17, 2017 12:32 PM GMT
Constant regulatory delays have hampered revenues from OTC clearing services, according to Deutsche Boerse chief executive Carsten Kengeter.

In its quarterly earnings call, Deutsche Boerse said it expects to achieve double-digit revenues in OTC clearing, but highlighted it is currently “clearly below that level as the transformational phase”.

Kengeter said that regulatory delays to central clearing in Europe, specifically with the delay for category three counterparties, has hampered revenues for the business.

“We had last year on the very low single-digit million revenue from that [OTC clearing] area and there is in that category a risk of underperforming depending on the regulatory outcome,” said Kengeter.

“I think we have to be realistic and honest about….being behind in the OTC clearing area.”

Last year the European Securities and Markets Authority (ESMA) proposed a two year delay to the central clearing mandate for category three firms, such as pension funds and smaller financial institutions.

An exemption from the central clearing mandate of interest rate and credit default swaps was set to expire for category 3 firms, which include pension funds and insurance companies, on 21 June 2017.

However, the German exchange group remains optimistic about the OTC clearing business, and is aiming to earn revenues of €50 million by 2018.