The international derivatives exchange Eurex will extend its OTC Wholesale Facility. Together with the launch of Eurex Release 11, scheduled for 10 November 2008, customers will now be able to reference equity index swaps in the existing functionality Exchange for Swaps (EFS).
This will allow trades which combine all available Eurex index futures with related OTC equity index swaps. As of today, the facility can be used for OTC interest rate swaps/swaptions, credit default swaps (CDS) and inflation swaps in combination with Eurexs fixed-income futures, credit futures and inflation futures respectively.
“In the last couple of months, we have seen growing volume transferring from the OTC equity index swap market into the exchange environment,” says Peter Reitz, member of the Eurex Executive Board. “By offering this extension of our functionality, we will further enable the migration of more OTC volume to central clearing with all its advantages. Foremost, we eliminate counterparty and credit risks through our central counterparty.”
Volumes of Eurex Clearings OTC facility have strongly risen over the last few years. In 2008, a monthly average volume of more than 70 million contracts are cleared via this facility. Among this, about 1.5 million interest rate futures are on average processed via EFS per month. An exchange for swaps trade is defined by the simultaneous exchange of a long/short futures
position against a payer/receiver swap position (e.g. a Eurex sector index future against a related sector index swap).
EFS belongs to a set of OTC Wholesale functionalities available for index products. Currently, participants can a) enter block trades, b) enter futures and options with individually defined contract specifications (using Eurexs flexible contract facility) as well as c) simultaneously trade equity index futures and related cash baskets (using the Exchange for Physical Index facility).
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