Eurex Bonds added a number of products to its portfolio, which include new issues by the KfW (Kreditanstalt fr Wiederaufbau), the European Investment Bank, and individual German states, as well as jumbo Pfandbrief issues. Market makers will provide liquidity in these products and the transactions will be cleared and settled via Eurex Clearing AG.
Eurex Clearing is functioning as the Central Counterparty in the tried-and-proven form. Last year, Eurex adapted the clearing conditions for bond trading to those on the OTC market in regards the modalities of delivery after a transaction has been concluded.
The technical innovations at Eurex Bonds include a straight Internet connection to the trading system, which Eurex Bonds has been offering participants since the end of last year. It represents a cost-effective alternative to access via dedicated lines. The German Finance Agency is now in the connection process as a new participant on Eurex Bonds – it is already fully connected technically and is currently in the system simulation phase.
The Finance Agency has been the central service provider for the Federal Republic of Germany and the German federal government since last year in all matters related to debt management and administration. The Bundesbank, the German central bank, has had active trading operations on Eurex Bonds since October 2000.
There are currently 23 banks from Europe connected to Eurex Bonds. The liquidity is provided by the joint venture partners as market makers. All participant banks can enter orders as well as quotes. The platform is open to additional participants to join and is not tied to a Eurex membership. Beyond that, there is also an interest on the part of connected market participants to be included in the company’s holding structure. In the future, Eurex will also take on the leading role within the joint venture, in addition to theexisting function as clearinghouse. Through the increased access to functions of the Eurex line organization, Eurex Bonds will take advantage of synergies with the parent company. This support, above all, affects the Marketing, Sales, Product Development, Member Readiness, Market Services and Technical Helpdesk divisions. An advisory board that meets regularly, the Eurex Bonds Advisory Board, will actively support the company, similar to the Working Committees at Eurex. Representatives from the world’s leading bond trading houses from the group of joint-venture partners are seated on this advisory body. In its first meeting at the end of last year, the Advisory Board mapped out the course for the new initiatives that have nowbeen launched.
“We want to establish Eurex Bonds as the leading platform for bond trading in Europe,” said Eurex CEO Rudolf Ferscha. He went on to say that the new products, the connection alternative via the Internet and the increased use of Eurex line functions, as well as the tried- and-proven use of the Central Counterparty support this objective. Through the stronger involvement in Eurex Bonds, Eurex wants to further expand its function as a central provider for all of the trading in fixed-income products. “Eurex Bonds and Eurex Repo are an integral part of the successful positioning of Eurex in trading with capital market derivatives and fixed income securities,” Ferscha concluded.