J.P. Morgan becomes Eurex GC Pooling's first balance sheet netting pilot
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J.P. Morgan becomes Eurex GC Pooling's first balance sheet netting pilot 28 January 2020Frankfurt Reporter: Drew Nicol
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J.P. Morgan has stepped up to be the first pilot client for a new balance sheet netting tool offered through Eurex GC Pooling, a joint offering from Eurex Repo and Clearstream.
GC Pooling is a highly-liquid market for secured funding and offers the possibility of reusing received collateral for further money market transactions.
Balance sheet netting allows market participants to offset certain securities finance transactions against one another and, as such, is an important way to reduce balance sheet consumption.
In a statement on the project, Deutsche Boerse, which owns Eurex and Clearstream, says onboarding the US’ largest bank marks a major step in rolling out of additional balance sheet netting opportunities between the GC Pooling and Repo (general collateral and special) market for Eurex Repo clients.
A spokesperson for Deutsche Boerse confirms to SLT that J.P. Morgan is currently the only pilot, but the German exchange is in talks with five other “major clients” about on-boarding in the coming weeks and months.
J.P. Morgan is one of the Eurex Partnership Program design partners and member of the new Repo Board Advisory Committee, which had its first meeting in November 2019.
Lav Lukic, global head of rates repo trading at J.P. Morgan, says: “The established volumes of GC Pooling, when combined with the possibility of more efficient netting, should be a positive driver on the overall repo specials market volumes on the Eurex platform.”
Lukic adds that the new tool closes the loop on the ability to net balance sheet between GC Pooling and specials.
Frank Gast, managing director at Eurex repo and head of sales Europe – fixed income, funding and financing, notes: “We greatly appreciate J.P. Morgan’s support for initiatives such as our Partnership Program and onboarding them as a client for Eurex GC Pooling with balance sheet netting is just the latest successful cooperation between us.
“Together with Clearstream, we are looking forward to onboarding and setting up more clients on this service in the coming weeks.”
In 2019 as a whole compared to the year before, GC Pooling’s average outstanding volumes rose 20.5 percent to €44.6 billion, while the Repo Market average volumes rose 1.8 percent to €57.1 billion.
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