Eurex continues to win clearing business from rivals in the UK

Eurex’s profit sharing scheme continues to win clearing business from rivals in the UK even as the battle for euro-clearing continues. Since Britain fully left the EU in December, clearing euro derivatives has become a Brexit battle as Brussels seeks to build up the bloc’s own capital market and end reliance on London.

Interest rate derivatives were again the standout sector with 31 percent year-on-year growth, from 37.6 million traded contracts to 49.5 million. Index derivatives also increased by 25 percent, from 47.0 million traded contracts to 58.7 million. However, total contracts traded in equity derivatives fell by 8 percent to 15.3 million.

Eurex disclosed that notional outstanding volumes in OTC Clearing grew strongly in August, climbing 40 percent overall compared to the same month last . Overall outstanding volume stood at EUR 28,792 billion at the end of August compared to EUR 20,612 billion the year before.

Additionally, interest rate swaps and overnight index swaps posted growth of 28 percent and 122 percent respectively. Average daily cleared volumes also increased by 125 percent overall, with interest rate swaps and overnight index swaps recording growth rates of +9 percent and +58 percent, respectively.

At Eurex Repo, average daily term-adjusted volume grew by 94 percent compared to August last year – up from EUR 123.4 billion to EUR 239.5 billion. The GC Pooling market was up 61 percent while the Repo Market grew by 108 percent year-on-year.

The Eurex FX offering of classic FX futures and options, in combination with the rolling spot futures, allows traders to manage their FX exposures with listed products.

The pan-European exchange has made efforts over the past year to expand its FX trading business, most recently signing major banks to support their FX futures, from clearing to trading.

Eurex’s currency trading desk currently offers various FX derivatives products, including FX futures available in 19 currency pairs, all with quotation and tick sizes in-line with existing OTC FX standards. A liquidity scheme caters for tight pricing and competitive liquidity, it says.

However, London remains the pre-eminent in FX and OTC derivatives, which are used by investors to hedge their portfolios, but market participants are concerned that the Brexit deal will cause disruption in the cross-border derivatives market.

UK clearinghouses must decide whether to shift derivatives trades worth billions of euros from Britain. For instance, LCH, the LSE-controlled clearing house that processes around 90 percent of euro-denominated derivatives, is now outside the bloc’s legal system. The LSE said its pan-European platform Turquoise would shift trading in shares of companies based in the bloc to its new Dutch hub if it loses access to the single market.