Eurex Clearing has partnered with Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, J.P. Morgan and Morgan Stanley in the launch of a new OTC interest rate swaps (IRS) clearing service to be called EurexOTC Clear for IRS.
Eurex says the clearing house will deliver efficient risk management and safety for dealer and client clearing prior to obligated clearing in Europe once the European Market Infrastructure Regulation (EMIR) takes effect. The CCP is expected to be technologically ready by July and rolled out in the market in the second half of the year.
“We are excited to work closely with the leading OTC derivative dealers in rolling out our new service, says Andreas Preuss, CEO of Eurex. Our objective is to deliver the market leading solution for OTC client clearing in Europe. Our customers will benefit from a broad product coverage across asset classes, full portfolio based risk management across listed and OTC products, strong asset protection and a broad collateral universe.
EurexOTC Clear for IRS will integrate the clearing and collateralization of OTC and listed derivatives in a single clearinghouse and framework. Several clearing firms have already connected to the CCP in order to perform simulated, functional tests.
“A strong value proposition is key to success in this market, says Jon Hitchon, global head of Markets Clearing at Deutsche Bank. Eurex Clearing has always been at the forefront of innovation in CCP risk management. It is our objective to offer choice to our customers to select the CCP offering that addresses their needs in the most efficient and effective way. We believe Eurex OTC Clear for IRS will deliver a strong value proposition.
As part of its plan to prepare for upcoming regulations in Europe, Eurex has also released Eurex Clearing Prisma, a portfolio-based risk management system enabling cross-margining of listed and OTC derivatives. Client Asset Protection, including the Individual Clearing Model, a full individual segregation service, was launched in August 2011, along with omnibus segregation services.
The CCP was launched as U.K.-based buy-side trade body the Investment Management Association (IMA) warns that uncertainty over how clearers will handle issues related to segregation and insolvency have hampered preparation for new OTC derivatives rules.
Buy-side traders will be reliant on their clearing members relationships with central counterparties [CCPs] and need to ensure their clients interests are being protected appropriately, says Jane Lowe, director of markets at the IMA. But some clearers have not yet responded with the user-friendly solutions we would have expected.
Lowe said IMA members needed legal documentation with details on how assets will be protected and the types of segregation and other issues related to how clearing members need to interact with a CCP.
(CG)