With the start of the new year, Eurex Bonds added a number of products to its portfolio in response to increased demand from participants. These include new issues by the KfW (Kreditanstalt für Wiederaufbau), the European Investment Bank and individual German states as well as jumbo Pfandbrief issues. In these products as well, market makers provide for liquidity and transactions are cleared and settled via Eurex Clearing AG.
Eurex Clearing is functioning as the Central Counterparty in the tried-and-proven form. Eurex already adapted the clearing conditions for bond trading to those on the OTC market last year as regards the modalities of delivery after a transaction has been concluded. Thus, the well accepted Eurex clearing structure applies to trading in futures, bonds and repos in this market as well.
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 ? German central bank ? has had active trading operations on Eurex Bonds ever since October 2000.
There are currently 23 banks from Europe connected to Eurex Bonds. The liquidity is provided for by the joint venture partners as market makers. All participant banks can enter orders as well as quotes. The platform is open for further 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 in being 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 the existing function as clearinghouse. Through the increased access to functions of the Eurex line organization, Eurex Bonds will exploit synergies with the parent company. This support above all affects the divisions Marketing, Sales, Product Development, Member Readiness, Market Services and Technical Helpdesks. An advisory board that meets regularly, the so-called Eurex Bonds Advisory Board, will actively support the company, similar to the Working Committees at Eurex. Representatives of the worldwide 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 had marked out the course for the new initiatives that have now been launched.
Eurex CEO Rudolf Ferscha emphasized: "We want to establish Eurex Bonds as the leading platform for bond trading in Europe." 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, he added. 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 said.
