Eurex Clearing has cleared its first cross currency swap transactions, with the trades being submitted by JP Morgan and Morgan Stanley.
In a release issued today, Deutsche Börse Group says that cross currency swaps represent an “important component” of its overall FX strategy, which it is executing across Eurex, Eurex Clearing and 360T.
Eurex Clearing’s OTC FX service currently offers interdealer clearing of EUR/USD and GBP/USD cross currency swaps of up to 50 years maturity. It also clears deliverable FX spot, FX forwards and FX swaps of up to two years that are executed at 360T.
The first extensions to the service are planned for 2020 with the launch of client clearing. An enhanced product suite enables clients of Eurex and 360T to benefit from portfolio effects and operational efficiencies achieved when using a single clearing house across multiple exchange-traded and OTC FX products.
Charles Bristow, head of rates, fixed income financing and credit portfolio trading, JP Morgan, says: “Cross currency swaps play an important role in the flow of capital through the international markets. Moving to a centrally cleared model is a significant moment for the asset class as it reduces the complexity linked to large, bilateral counterparty exposures, enhances resource efficiency and increases overall marketplace resilience.”
Andrew Millward, head of rates and FXEM for EMEA at Morgan Stanley, adds that his firm is happy utilising clearing for cross currency swaps because it appreciates “the benefits that post-trade novation of risk can bring in terms of credit and risk optimisation”.
Erik Müller, CEO of Eurex Clearing, hailed this development as “an important step in delivering greater efficiencies to the FX market”, adding that clients could benefit from “significant” capital relief and cost savings by centrally clearing their OTC FX exposures.
He continues: “Our objective is to build a cleared FX liquidity pool over time, as further clients decide to utilise our new FX clearing services.”
Meanwhile, Carlo Kölzer, head of FX at Deutsche Börse Group and 360T CEO, says: “Regulatory changes such as uncleared margin rules pose a burden to our clients and OTC FX clearing helps them to cope with these challenges. The OTC FX clearing capabilities of Eurex Clearing are therefore the logical complement to the Group’s FX OTC offerings via 360TGTX and the listed FX futures at Eurex.”