To keep expanding its leading position in bond trading, Eurex Bonds will open up its platform for further participants to join. The joint venture of Eurex and leading bond trading houses is changing its market model as a result. Starting immediately, all Eurex-Bonds participants will be able to enter orders as well as quotes. The liquidity will still be secured by the joint venture partners. In the future, the joint venture wants to expand the product line further to include Jumbo Pfandbrief issues, European government bonds and repos. Eurex Bonds is expecting about 20 participants to be active in trading on the platform by year-end.
The Deutsche Bundesbank has been very active on Eurex Bonds, which it uses to sell off amounts set aside for market-management operations in accordance with its special status for such operations. In his speech at the Bundebank's year-end press conference, Bundesbank president Ernst Welteke emphasized the role of Eurex Bonds: The Bundesbank has been performing its market-management operations through the new, Eurex-Bonds bond-trading system since October. The Bundesbank expects that, in the medium term, Eurex Bonds will establish its position as the leading electronic platform for bond trading in Europe. A large part of the trading in German federal securities that has been based abroad up to now could then take place on Eurex Bonds, he said.
Eurex Bonds is using the function of the central counterparty for processing, clearing and settlement through the Eurex clearinghouse. The central counterparty, which stands as the counterparty between all transactions by the participants, assumes the risk of clearing and settlement for the buyers and the sellers, who have to put up margin collateral in return. At the same time, the central counterparty provides for the desired anonymity that applies in trading for settlement as well.
Eurex Bonds, the over-the-counter market for integrated cash and derivatives trading in federal bonds, has been in operation since October 6. Eurex operates the ECN together with the international trading houses ABN Amro, Barclays, BBVA, BNP Paribas, Caboto, Credit Suisse First Boston, Commerzbank, Deutsche Bank, Dresdner Bank, Goldman Sachs, Morgan Stanley Dean Witter and West LB. The goal is to build up the most liquid electronic market for German and European federal bonds and implement the integration of cash and derivatives trading at the same time.
