Financial Times: Eurex to broaden clearing battle with UK’s LCH

30 October 2018

Deutsche Börse’s derivatives exchange is to broaden its battle in clearing with the UK’s LCH by extending its scheme to share profits with users to foreign exchange swaps and repo markets.

Eurex, the German exchange operator, began a scheme in January to share profits with its users to entice more derivatives clearing — a process that manages the risk of contagion if one party to a trade defaults — to financial hubs in the eurozone from its historic centre in London.  Clearing has become a contentious issue among politicians and regulators after Brexit because it is a key pillar in global financial stability. The repo market is also a key path for the European Central Bank to transmit its monetary policy to markets. Repo markets are used by investors to finance their short-term positions by borrowing and lending assets for a couple of days.

Eurex said it would use the same profit-sharing and governance structure scheme for repo and FX swaps. Commerzbank, Deutsche Bank, JPMorgan and Morgan Stanley have expressed interest in both schemes, the exchange said. Citigroup, DekaBank and LBBW have shown interest in the repo programme, it added. It expects the schemes to come into effect in the first quarter of next year.

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