EUREX CLEARING PLANS NEW CCP PLATFORM FOR OTC DERIVATIVES

Posted July 22, 2008

FRANKFURT – Eurex Clearing has announced plans to build a European central counterparty (CCP) platform for clearing OTC derivatives trades, with its first phase focusing on credit index clearing, namely European iTRAXX index exposures.

Eurex Clearing says it is courting several infrastructure providers for the new CCP platform, which it plans to launch in the first half of 2009. Eurex Clearing is also considering extending the platform to other asset classes, depending on market demand.

“The benefits of our service extension would be increased market stability and capital efficiency,” says Thomas Book of the Eurex Executive Board, who is responsible for clearing for the board. “Customers would profit from straight-through processing, enhanced collateral management and multilateral netting for OTC trades which currently account for 84 percent of all derivatives traded.”

Eurex says its planned CCP platform, which will use existing Eurex Clearing functions, would increase capital efficiency by reducing balance sheet exposure. The platform will promote the optimal use of margin deposits, eliminate manual process errors and effectively cover the OTC market’s counterparty default risk. The platform will also include new trade and risk management capabilities, and is partly a response to recent systemic risk concerns stemming from trade confirmation backlogs and potential counterparty defaults.