EUREX PROPOSES CENTRAL CLEARING SOLUTION FOR CREDIT DERIVATIVES

Posted October 10, 2008

NEW YORK – Eurex Clearing has presented a central clearing solution for credit derivatives on the invitation of the Federal Reserve Bank in New York, as part of its plan to build a consortium structure for shared governance and control of clearing.

“Eurex and Eurex Clearing firmly believe that central clearing services are the most suitable option to effectively mitigate existing counterparty risk in OTC credit markets and improve market transparency – both elements are key to a sustainable reduction of systemic risk in credit markets on a global scale,” says Thomas Book, a member of the Eurex Executive Board who is responsible for clearing. “Eurex Clearing’s central counterparty clearing model has proven resilient and robust for listed futures and options products, especially during the recent turbulence in the financial markets.”

Eurex Clearing’s solution will have two stages. The first is a ready-to-use solution for iTraxx index contracts and some single-name credit default swaps, as well as CDX contracts, pending a licensing arrangement with Markit, a financial services information provider. The second is an OTC clearing solution for ISDA-documented [International Swaps and Derivatives Association Inc.] credit derivatives planned for the first half of 2009. The solution will link into Eurex Clearing’s data warehouse infrastructure.

The Deutsche Bundesbank is backing Eurex’s proposed central clearing solution for credit derivatives, as a way to improve the stability of European financial markets.