Eurex launches OTC derivatives Switch Incentive Program
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Eurex launches OTC derivatives Switch Incentive Program 10 September 2019Frankfurt Reporter: Maddie Saghir
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Eurex Clearing is seeking to capture over-the-counter (OTC) interest rate derivatives activities shifting to the EU27 from the UK after Brexit with a new central counterparty (CCP) Switch Incentive Program.
The programme will operate until year-end 2019 to support market participants in migrating OTC interest rate derivatives positions and provides for a 100 percent discount on booking fees for portfolio switches to Eurex Clearing until the end of 2019.
The programme comes in response to recent calls from regulators and central banks warning market participants to prepare for all possible Brexit scenarios and reiterated that the EU’s temporary measures for CCPs expires in March 2020.
Currently, a large part of the multi-billion euro derivatives business has been conducted in London, but following Britain's withdrawal from the EU on 31 October, EU supervisors may no longer have the necessary powers for effective market oversight.
Market participants speculate that to avoid market distortions, the London Stock Exchange (LSE) may continue to settle euro derivatives for a transitional period even in the event of a No-Deal Brexit.
Matthias Graulich, member of Eurex Clearing executive board, said: “Switching existing business and conducting new business at Eurex Clearing now seems to be a no-regret move for many firms. We see very competitive euro swap execution prices, and market participants can also take advantage of secondary benefits like lower funding costs.”
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