Euronext To Launch OTC Derivatives Clearing

Euronext is set to push into the over-the-counter (OTC) derivatives market by partnering with Paris-based LCH Clearnet SA to launch a new clearing service.

The service is scheduled to be launched in the spring of 2015, as European banks and clearing members preparing for the onset of mandatory clearing for certain derivatives in the third quarter of next year.

It will begin with OTC equity derivatives, but aims to add other asset classes at a later date.

“Against the backdrop of the G20 post-crisis reform programme of increased transparency and reduced systemic risk in derivative markets, we will be positioning our service to deliver clients with the capital efficiency and risk management benefits of central clearing,” says Lee Hodgkinson, head of markets and global sales, Euronext.

Most OTC equity trades are conducted bilaterally between dealers, however some clearing houses such as London-based LCH Clearnet and Deutsche Boerse’s Eurex Clearing, have facilitated clearing of some equity swaps transactions.

The technology for Euronext’s service will be provided by Cinnober, a Swedish trading technology company. Cinnober will also provide OTC prices as a reference for investors.