EXCLUSIVE: Eurex offers respite from capital costs
30 August 2016 Frankfurt
Image: Shutterstock
Eurex Clearing is preparing to offer a new hybrid membership model that combines elements of a direct clearing membership and the traditional client clearing service model.
The ISA Direct will allow for certain obligations, such as contributions to the default fund and default management, that direct members of Eurex Clearing’s central counterparty (CCP) must commit to, to be taken over by clearing agents.
Matthias Graulich, member of the executive board of Eurex Clearing, said: “Our regular clearing members will continue to act as a clearing agent, providing a variety of mandatory and optional service functions, but the client becomes a direct member of the clearinghouse.”
Graulich also highlighted the potential benefits that ISA Direct will bring to the European repo market as it will offer banks an opportunity to tackle the significant balance sheet costs associated with repo transactions.
Eurex Clearing confirmed that it is in intensive talks with several large buy-side clients and clearing brokers interested in the new model. First transactions in over-the-counter interest rate swaps are expected to be completed in Q4, first repo transactions are expected latest for Q1 2017.
According to Graulich, the expected take-up of the new membership model will depend in part on the conclusion of the latest discussions on further details of the Basel III leverage ratio.
Specifically, the answer to the question of whether collateral can be used to offset derivatives exposure will “define the difference between the product being very attractive or super attractive”.
The ISA Direct will allow for certain obligations, such as contributions to the default fund and default management, that direct members of Eurex Clearing’s central counterparty (CCP) must commit to, to be taken over by clearing agents.
Matthias Graulich, member of the executive board of Eurex Clearing, said: “Our regular clearing members will continue to act as a clearing agent, providing a variety of mandatory and optional service functions, but the client becomes a direct member of the clearinghouse.”
Graulich also highlighted the potential benefits that ISA Direct will bring to the European repo market as it will offer banks an opportunity to tackle the significant balance sheet costs associated with repo transactions.
Eurex Clearing confirmed that it is in intensive talks with several large buy-side clients and clearing brokers interested in the new model. First transactions in over-the-counter interest rate swaps are expected to be completed in Q4, first repo transactions are expected latest for Q1 2017.
According to Graulich, the expected take-up of the new membership model will depend in part on the conclusion of the latest discussions on further details of the Basel III leverage ratio.
Specifically, the answer to the question of whether collateral can be used to offset derivatives exposure will “define the difference between the product being very attractive or super attractive”.
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