Eurex expands OTC clearing services to Japan 13 March 2020Frankfurt Reporter: Drew Nicol
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Eurex’s central counterparty (CCP) is now able to offer its clearing services in Japan, after gaining a licence from the country’s Financial Services Agency.
Eurex Clearing can now operate as a ‘foreign financial instruments clearing organisation’ and allow Japanese financial institutions to directly access its swaps clearing services and combine their listed and over-the-counter (OTC) euro yield curve business in one single place.
The service extension into one of the largest fixed income markets is driven by client demand and will support the momentum of the CCP’s EU-based liquidity pool for euro Swaps, Eurex says.
The service is already available throughout the EU and US.
In the US, Eurex operates under the associated legally segregated, operationally commingled (LSOC) model. Since it first set out its stall in the US in February 2019, Eurex says it has onboarded more than 20 clients with over 3,500 registered funds.
In a statement on the new licence, Eurex explains that access to the Japanese market is “a logical next step” to expand its liquidity pool.
Japanese institutions are very active in European fixed income futures on Eurex and also have significant exposure in the euro swap market. Japan is one of the largest exchange-traded derivatives and OTC derivatives markets globally.
Christopher Perkins, global head of OTC clearing and foreign exchange prime brokerage at Citi, says: “Citi is very pleased to extend our unique and differentiated cleared swap connectivity on Eurex to the Japanese market.
“We look forward to working with Eurex to onboard new clients in Japan.”
According to Eurex Clearing, it has developed a strong liquidity pool for clearing euro-denominated interest rate derivatives, mainly through its partnership programme launched in early 2018.
This market-led initiative is designed to further accelerate the development of a liquid, EU-based alternative for the clearing of OTC interest rate derivatives.
It benefits clients and the broader market place through greater choice and competition, improved price transparency as well as reduced concentration risk, says Eurex.
Total notional outstanding of over €18 trillion (as of the end of February) keeps Eurex’s overall market share at about 18 percent.
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