Eurex expands FX futures offering to emerging markets
17 August 2022 Germany
Image: metamorworks/stock.adobe.com
Eurex has announced it will begin to trade new foreign-exchange (FX) futures contracts covering Brazilian Real (BRL), Mexican Pesos (MXN) and South African Rand (ZAR) on 10 October 2022.
In total, five new contracts will be listed covering emerging markets currency pairs BRL/USD, MXN/USD, MXN/EUR, ZAR/USD, and ZAR/EUR.
The European derivatives exchange company says an accompanying liquidity scheme will ensure tight pricing and competitive liquidity.
The new contracts will be cash settled in US dollars or euros upon expiry. Therefore, clearing members can use their existing infrastructure and will not be required to open new cash accounts in these emerging markets currencies.
According to Eurex, FX futures are similar to over-the-counter (OTC) FX forwards, but have significantly lower counterparty credit risk as financial obligations are guaranteed by Eurex Clearing as the central counterparty.
In addition, centrally cleared FX futures can offer benefits to customers over OTC FX forwards in terms of margin, funding and operations.
Commenting on the announcement, Jens Quiram, global co-head of fixed-income and certificate derivatives and repo sales at Eurex, says: “We see more and more firms coming into the scope of the Uncleared Margin Rules who are looking for solutions to reduce their average aggregate notional amount and bilateral margin requirements.
“Listed FX futures can address these challenges, while reducing the overall risk of a portfolio due to Eurex Clearing’s multilateral netting capabilities.”
In total, five new contracts will be listed covering emerging markets currency pairs BRL/USD, MXN/USD, MXN/EUR, ZAR/USD, and ZAR/EUR.
The European derivatives exchange company says an accompanying liquidity scheme will ensure tight pricing and competitive liquidity.
The new contracts will be cash settled in US dollars or euros upon expiry. Therefore, clearing members can use their existing infrastructure and will not be required to open new cash accounts in these emerging markets currencies.
According to Eurex, FX futures are similar to over-the-counter (OTC) FX forwards, but have significantly lower counterparty credit risk as financial obligations are guaranteed by Eurex Clearing as the central counterparty.
In addition, centrally cleared FX futures can offer benefits to customers over OTC FX forwards in terms of margin, funding and operations.
Commenting on the announcement, Jens Quiram, global co-head of fixed-income and certificate derivatives and repo sales at Eurex, says: “We see more and more firms coming into the scope of the Uncleared Margin Rules who are looking for solutions to reduce their average aggregate notional amount and bilateral margin requirements.
“Listed FX futures can address these challenges, while reducing the overall risk of a portfolio due to Eurex Clearing’s multilateral netting capabilities.”
Next derivatives article →
Indian and Singapore exchanges extend derivatives trading link through Connect platform
Indian and Singapore exchanges extend derivatives trading link through Connect platform
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
