Eurex plans new derivatives products to take on rivals

LONDON Tue May 27, 2014 12:52pm EDT

LONDON May 27 (Reuters) - Deutsche Boerse's Eurex, Europe's largest derivatives exchange, will launch a range of new products later this year, as it seeks to fend off competition from U.S. rivals and capitalise on new rules on derivatives trading.

Eurex will offer futures and options contracts on six currency pairs, including the euro-U.S. dollar and euro-Swiss franc, from July 7, its head of product research and development Mehtap Dinc said on a conference call with reporters on Tuesday.

The exchange, which currently dominates long-term interest rate derivatives, will also expand its interest rate products starting in September to cover the entire European interest rate curve, Dinc said.

Exchanges have been seeking to take advantage of a regulatory shift requiring more derivatives-like interest rate swaps and credit default swaps - previously bought and sold through dealers - to be traded on electronic platforms, cleared through central counterparties and recorded. The aim is to improve transparency and lower risk.

Nasdaq OMX launched NLX, a London-based market that allows trading in a range of short- and long-term interest rate, euro and sterling-denominated derivative products, a year ago. IntercontinentalExchange acquired Liffe, Europe's second-largest derivatives market and leader in short-term interest rate contracts, in a $11 billion takeover of NYSE Euronext last year.

CME Group's European derivatives exchange opened last month, providing trading in 30 FX futures and a range of commodities contracts. CME is also planning to offer interest rate swap futures contracts targeted at the European market.

A swap future is a standardised contract that mimics the economic exposure of traditional over-the-counter (OTC) interest rate swaps but is traded on-exchange and requires less margin.

Eurex said that Euro swap futures based on physically settled two-, five-, 10- and 30-year euro-denominated swap contracts will be among its new interest rate products.

They will be cross margined with other fixed income futures it offers, meaning the funds a market participant posts to back swap future positions can be applied to other positions, reducing the total margin payment required.

Its FX futures will be physically delivered through the Continuous Linked Settlement (CLS). They differ from the CME's products as they are based on the spot market rather than the futures market, Dinc said.

Eurex will add futures in more currencies such as the Japanese yen at a later date, he said. (Reporting by Clare Hutchison; Editing by Susan Fenton)

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