Eurex Launches Centralized Clearing for Cross Currency Swaps, OTC FX

Eurex, an international derivatives exchange and a member of the Deutsche Börse Group, announced on Monday the launch of a centralized clearing service, Eurex Clearing, for deliverable cross-currency Swaps Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Read this Term and OTC FX. The launch came after a long testing phase of the platform.

The clearing members in the network include banking giants like Commerzbank, JPMorgan and Morgan Stanley, who also participated in the testing. In addition, the platform guarantees settlement in CLSClearedFX.

“Central clearing and guaranteed settlement for cross-currency swaps in CLSClearedFX is a world first. We are pleased to have launched this together with CLS to deliver capital, Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term and settlement benefits, providing further resilience to the market,” said Eurex Clearing CEO, Erik Müller.

A Necessary FX Service

The official announcement detailed that the transactions on the clearing platform will be cleared and settled on a net basis, which significantly reduces capital requirements under SA-CCR.

Eurex is an established player in the OTC FX clearing business. It matches FX Spot, FX Forward and FX Swap on Deutsche Börse’s global FX unit, 360T and is reporting a surge in key business metrics for several months. The company is now launching non-deliverable forwards (NDF) clearing that is scheduled for the second half of 2021.

The new platform will offer clearing services to both deliverable and non-deliverable FX products.

“The addition of Eurex Clearing to CLSClearedFX, our settlement service for cleared FX and derivatives, demonstrates the benefits we can deliver to market participants by collaborating with other market infrastructures to further mitigate systemic risk,” Keith Tippell, Global Head of Product at CLS, added.

“Cross-currency swaps play an important role in the flow of capital through the international markets,” Charles Bristow, Head of Rates, Fixed Income Financing, and Credit Portfolio Trading at JPMorgan, added. “Moving to a centrally cleared model is a significant moment for the asset class as it reduces complexity, enhances efficiency and increases market resilience.”