Eurex Launches Deliverable Cross Currency Swaps Clearing
Posted by Colin Lambert. Last updated: July 26, 2021
Following what it says was a successful test phase, Eurex Clearing has gone live with its clearing service for deliverable cross currency swaps and OTC FX, a service it says is a “world first”. Commerzbank has joined JP Morgan and Morgan Stanley as clearing members to enable the completion of testing and go-live of the service.
Transactions are cleared and settled on a net basis across cross currency swaps and OTC FX, thus significantly reducing capital requirements under SA-CCR, the standardised approach for measuring counterparty credit risk. Eurex Clearing guarantees settlement in CLS ClearedFX, which provides liquidity and funding benefits while mitigating settlement risk. “The addition of Eurex Clearing to CLS ClearedFX, our settlement service for cleared FX and derivatives, demonstrates the benefits we can deliver to market participants by collaborating with other market infrastructures to further mitigate systemic risk,” says Keith Tippell, global head of product at CLS.
Eurex OTC FX clearing includes FX spot, forward and swaps matched on Deutsche Börse’s 360T platform. The launch of NDF clearing is scheduled for the second half of 2021. Eurex Clearing will then be offering clearing services for both, deliverable and non-deliverable FX products. It says this will provide further capital and operational efficiencies to clearing members, leveraging the same connectivity for both product groups.
“Eurex Clearing has addressed significant complexity in implementing clearing and guaranteed settlement of these products, providing capital savings and operational efficiencies,” says Jochen Litzinger, divisional head of the interest rates, currencies and commodities trading cluster at Commerzbank. “It has been an important project on our side to innovate in the FX market, where we received significant support from Sernova Financial to structure our clearing workflows across different central clearing parties in the most efficient way.”
Charles Bristow, head of rates, fixed income financing and credit portfolio trading at JP Morgan, adds, “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 complexity, enhances efficiency and increases market resilience.”