Eurex Clearing, Europe's leading clearinghouse, announced today that it plans to expand its Eurex OTC Clear service to include OTC-traded interest rate and equity derivatives. The new services will be introduced in the context of the upcoming regulatory reforms expected to require mandatory clearing for standardized OTC derivatives in the U.S. and Europe.
Currently, Eurex's OTC Clear service comprises OTC-traded Eurex look-alike futures and options on equities and interest rates as well as Eurex Credit Clear, a clearing service for OTC credit default swaps. In 2010, Eurex Clearing processed 774 million contracts in OTC-traded products.
"The further expansion of our product coverage is an important part of our strategic agenda enabling our customers to prepare for the new regulatory environment", said Thomas Book, Eurex Executive Board member responsible for Eurex Clearing. "We will offer all clearing services in the relevant asset classes to our clearing members and buy-side clients to comply with new requirements in the most effective and capital efficient way."
In addition to the expansion of the Eurex OTC Clear service, Eurex Clearing's strategic agenda includes two further major initiatives focusing on risk management and safety for OTC derivatives. First, Eurex Clearing will introduce a new Client Asset Protection service for its listed and OTC markets, which will be launched beginning in Q2 2011 in close coordination with market participants. The Client Asset Protection service will offer full protection of client assets within the clearinghouse and allow for immediate portability of positions and assets in case of a clearing member default. Second, Eurex Clearing plans to introduce a new risk methodology for the clearinghouse, which will be portfolio-based rather than instrument focused as in many current CCP risk management approaches. The new portfolio-based risk methodology will allow cross-margining between Eurex's listed derivatives and OTC interest rate swaps and equity derivatives (except CDS), offering buy-side and sell-side firms significant margin and collateral efficiencies.
"Our objective is to be the industry leader in risk management standards. The new risk management approach will further contribute to the safety of the derivatives market, while delivering capital efficiencies to our clients by providing offsets particularly between Eurex's listed derivatives and OTC-traded derivatives," explained Book.
