Eurex Launches Incentive Campaign to Build EU Clearing

With European Union authorities keen to attract more euro clearing from the UK to the Eurozone, Eurex has started offering incentives to buy side clients to start clearing their interest rate derivative positions in the EU. The clearing house says the move supports the regulatory push and reduces the reliance of CCPs outside the EU.

Clients can register for the programme until the end of March 2023, and Eurex says when starting the clearing of OTC interest rate swaps (IRS), overnight index swaps (OIS), basis swaps and/or zero-coupon inflation swaps (ZCIS) at Eurex Clearing in 2023 they “may qualify for an incentive reward of up to EUR 50,000”. The qualification period runs from 1 January 2023 to 31 December 2023. Based on Eurex’s current eligible client base, it says the incentive pool can get as high as EUR 25 million.

“With this targeted incentive programme for buyside clients, we again demonstrate our strong commitment for a market-led solution which is designed to further accelerate the development of a liquid, EU-based alternative for the clearing of OTC interest rate swaps,” says Matthias Graulich, member of the Eurex Clearing executive board. “Especially against the backdrop of enduring uncertainty, changing rates and an increased need for hedging a broader marketplace through greater choice, improved price transparency, as well as reduced concentration risk is more important than ever.”

After prolonging the equivalence of UK CCPs until 30 June 2025 earlier this year, the European Commission has reiterated its financial stability concerns and renewed its call on market participants to use that period to substantially reduce their exposures to UK market infrastructures.

In the meantime, more than 600 clearing members and buy-side clients have been on-boarded by Eurex Clearing for swaps clearing, the firm says, adding notional outstanding in OTC interest rate derivatives rose by 40% since the beginning of the year to EUR 28 trillion in mid-October. The market share is roughly 20%.

Eurex adds, the new programme is complementing its CCP Switch incentive programme under which positions in OTC interest rate derivatives transferred to Eurex Clearing are completely exempted from booking fees. Eurex Clearing also opened its governance structure and shares a significant part of the revenues of its interest rate swap segment with the most active participants within the scope of the Eurex Partnership Programme, it adds.

Recent data from the Bank for International Settlements appears to indicate that the push to get more clearing in the EU is starting to have an impact, with interest rate derivative volumes traded in the UK declining, while they rose meaningfully in the EU.