Guus Warringa, chief legal counsel, APG Asset Management, said he expects the OTC clearing obligation will alter the pension fund managers business in an unprecedented way.
APGs future interest rate swaps (IRS) transactions will be cleared on Eurex Clearings new OTC services for these instruments, which went live on Tuesday, Nov. 13. The launch of the service comes as regulation mandates the use of CCPs for the clearing of OTC derivatives and interest rate swaps. Eurex Clearing, along with other exchange providers, are competing for market share of these trades ahead of the start of the clearing obligation in Europe, which is anticipated to commence in the second half of 2013. CCPs, including EurexOTC Clear, have already begun to onboard clients ahead of the regulation.
EurexOTC Clear for IRS will fully integrate the clearing and collateralization of OTC and listed derivatives in a single clearing house within one single framework. The new service will be further expanded in 2013.
Commenting on APGs choice of EurexOTC Clear for clearing IRS transactions, Warringa said: A full segregation solution for clients, a capital efficient margining process and a broad range of eligible collateral are essential elements for us in any CCP offering. We welcome Eurex Clearings OTC offering as it addresses major requirements of end clients.
The launch was supported by Eurex Clearings cooperation banks Barclays, Citigroup Global Markets, Credit Suisse, Deutsche Bank and J.P. Morgan. In addition, Commerzbank, HSBC, Royal Bank of Scotland, UBS and Basler Kantonalbank joined the service for the production start. All ten members have successfully cleared their first transactions via EurexOTC Clear for IRS. BNP Paribas, Goldman Sachs, Morgan Stanley, Nomura, NORD/LB, Socit Gnrale and further market participants are preparing to join the service as clearing members.
Eurex Clearings segregation solution the so-called Individual Clearing Model offers individual segregation of positions and customer collateral. At the same time, the service promises capital efficiencies through a broad eligible collateral spectrum and Eurex Clearing Prisma, the planned portfolio risk management across listed and OTC derivatives.
Launching a new OTC clearing service is a complex and challenging undertaking. Eurex Clearing has been very responsive in building a solution tailored to the specific needs of our buy-side clients. We see significant interest from buy-side firms for the EurexOTC Clear service and continue to work closely with Eurex Clearing and our clients to onboard in due time to meet the regulatory requirements and take advantage of the benefits from CCP clearing, said Piers Murray, global head of OTC Derivatives Clearing & PB at Deutsche Bank.
Over the last months we have jointly shaped our new clearing service. A lot of progress has been made with the support of market participants, and we are excited to deliver a superior solution for OTC client clearing in Europe. Based on our expertise in risk management and our established clearing of listed derivatives, we will be able to offer a strong solution in terms of product coverage, Client Asset Protection and capital efficiency, added Andreas Preuss, CEO Eurex.
(JDC)